Match List-I with List-II. LIST I LIST II (A) Liquidity Ratios (I) De…

Match List-I with List-II.

LIST I	LIST II
(A) Liquidity Ratios	(I) Debt to Capital Employed Ratio
(B) Solvency Ratios	(II) Net profit ratio
(C) Activity Ratios	(III) Current Ratio
(D) Profitability Ratios	(IV) Working capital Turnover Ratio

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A)-(III), (B)-(I), (C)-(IV), (D)-(II)

The functional classification groups ratios by what they measure.

(A) Liquidity Ratios — this matches (III) Current Ratio. It tests whether current assets can meet current liabilities.

(B) Solvency Ratios — this matches (I) Debt to Capital Employed Ratio. It tests the long-term debt position of the business.

(C) Activity Ratios — this matches (IV) Working capital Turnover Ratio. It shows how fast working capital is used to make sales.

(D) Profitability Ratios — this matches (II) Net profit ratio. It shows the profit earned on revenue from operations.

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… Types of Ratios: There are many types of ratios, viz., liquidity, solvency, activity and profitability ratios. The liquidity ratios include current ratio and acid test ratio.”

NCERT (2026-27 edition):
Solvency Ratios – “… Solvency ratios are calculated to determine the ability of the business to service its debt in the long run. The following ratios are normally computed for evaluating solvency of the business. 1. Debt-Equity Ratio; 2. Debt to Capital Employed Ratio; 3. Proprietary Ratio; 4. Total Assets to Debt Ratio; 5. Interest Coverage Ratio.”

NCERT (2026-27 edition):
Types of Ratios – “… The turnover ratios basically exhibit the activity levels characterised by the capacity of the business to make more sales or turnover and include Inventory Turnover, Trade Receivables Turnover, Trade Payables Turnover, Working Capital Turnover, Fixed Assets Turnover and Current assets Turnover.”

NCERT (2026-27 edition):
Types of Ratios – “… Profitability ratios are calculated to analyse the earning capacity of the business which is the outcome of utilisation of resources employed in the business. The ratios include Gross Profit ratio, Operating ratio, Net Profit Ratio, Return on investment (Capital employed), Earnings per Share, Book Value per Share, Dividend per Share and Price/Earning ratio.”