The correct answer is Option (4) → A-III, B-I, C-IV, D-II
Ratios are grouped by the purpose for which they are computed: liquidity, solvency, activity (turnover) and profitability.
(A) Dividend per share — this matches (III) Profitability Ratio. It shows the return the shareholders get out of the earnings of the business.
(B) Proprietory Ratio — this matches (I) Solvency Ratio. It compares shareholders’ funds with total assets and tests long-term solvency.
(C) Quick Ratio — this matches (IV) Current Ratio. Both are liquidity ratios; the quick ratio is the stricter form of the current ratio, leaving out inventories and prepaid expenses.
(D) Inventory Turnover Ratio — this matches (II) Activity Ratio. It measures how efficiently the inventory is used, so it is a turnover ratio.
NCERT (2026-27 edition):
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. 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.” NCERT (2026-27 edition):
Quick or Liquid Ratio – “… The quick assets are defined as those assets which are quickly convertible into cash. While calculating quick assets we exclude the inventories at the end and other current assets such as prepaid expenses, advance tax, etc., from the current assets. Because of exclusion of non-liquid current assets it is considered better than current ratio as a measure of liquidity position of the business. It is calculated to serve as a supplementary check on liquidity position of the business and is therefore, also known as ‘Acid-Test Ratio’.” |
