Match the following. LIST 1(Accounting ratio) LIST 2(Type of accounti…

Match the following.

LIST 1 (Accounting ratio)	LIST 2 (Type of accounting ratio)
(A) Current Ratio	(I) Liquidity Ratios
(B) Stock Turnover Ratio	(II) Activity Ratios
(C) Debt equity ratio	(III) Solvency Ratios
(D) Operating ratio	(IV) Profitability Ratios

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

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

Ratios are grouped by the question they answer: can the business pay its short-term dues (liquidity), can it meet its long-term obligations (solvency), how actively does it use its resources (activity or turnover), and how much does it earn (profitability).

(A) Current ratio — (I) Liquidity ratios.
It compares current assets with current liabilities, a short-term test.

(B) Stock turnover ratio — (II) Activity ratios.
Stock (inventory) turnover shows how fast inventory is sold, a measure of activity.

(C) Debt equity ratio — (III) Solvency ratios.
It compares long-term debt with owners’ funds, a test of long-term solvency.

(D) Operating ratio — (IV) Profitability ratios.
It relates operating cost to revenue from operations, so it is read with the profitability ratios.

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. Solvency ratios are calculated to determine the ability of the business to service its debt in the long run instead of in the short run. They include debt equity ratio, total assets to debt ratio, proprietary ratio and interest coverage ratio.”

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… 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. 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.”