Accountancy Part BAnalysis of Financial Statements

Ratios used in analysis of financial statement of a company may be cl…

Ratios used in analysis of financial statement of a company may be classified as:

(A) Gaining Ratio
(B) Liquidity Ratios
(C) Solvency Ratios
(D) Activity Ratios
(E) Sacrificing Ratio

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (B), (C) and (D) only

By purpose (functional classification), accounting ratios are liquidity, solvency, activity (turnover) and profitability ratios.

(A) Gaining Ratio — False. It is the ratio in which continuing partners gain a retiring partner's share, not an accounting ratio of a company.

(B) Liquidity Ratios — True. They measure the ability to pay short-term dues.

(C) Solvency Ratios — True. They measure the ability to meet long-term obligations.

(D) Activity Ratios — True. They measure efficiency in using resources.

(E) Sacrificing Ratio — False. It belongs to admission of a partner in partnership accounts.

NCERT (2026-27 edition):
Types of Ratios

Extract from the NCERT textbook

NCERT (2026-27 edition):
Gaining Ratio – “The ratio in which the continuing partners have acquired the share from the retiring/deceased partner is called the gaining ratio.”

NCERT (2026-27 edition):
Sacrificing Ratio – “The ratio in which the old partners agree to sacrifice their share of profit in favour of the incoming partner is called sacrificing ratio.”