Read the following information and answer the question.
Following is the Balance Sheet of Titanic Ltd. as at March 31, 2022.
| Particulars | Amount (₹) |
| 1. Shareholder's Fund a) Share Capital b) Reserves & Surplus |
24,00,000 6,00,000 |
| 2. Non-current liabilities Long-term borrowings |
9,00,000 |
| 3. Current liabilities a) Short term borrowings b) Trade Payables c) Short-term Provisions |
6,00,000 23,40,000 60,000 |
| Total | 69,00,000 |
| II. Assets 1)Non-Current Assets a) Fixed assets b) Tangible assets |
45,00,000 |
| 2. Current Assets a) Inventories b) Trade Receivables c) Cash and Cash equivalent d) Short-term loans & advances |
12,00,000 9,00,000 2,28,000 72,000 |
| Total | 69,00,000 |
The..............ratios are primarily a measure of earning capacity.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Profitability
Profitability ratios relate profit to revenue from operations or to the funds employed (gross profit ratio, net profit ratio, return on investment). They show how much the business earns, so they measure its earning capacity, the return on the resources used.
Option (1) Liquidity — Incorrect. Liquidity ratios measure short-term solvency.
Option (2) Activity — Incorrect. Activity ratios measure how efficiently assets are used.
Option (3) Debt — Incorrect. Debt ratios (such as debt-equity) measure long-term solvency and the risk from borrowed funds.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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