Match List – I with List – II. List - I List - II (A) Liquidity Ratio… | Accountancy Part B CUET question

Match List – I with List – II.

List - I	List - II
(A) Liquidity Ratio	(I) To check ability to meet long term contractual obligations
(B) Solvency Ratio	(II) To analyse the earning capacity of Business
(C) Activity Ratio	(III) To measure the short term Solvency
(D) Profitability Ratio	(IV) To measure the speed at which the activities of the business are being performed

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (A)-(III), (B)-(I), (C)-(IV), (D)-(II)

Each group of ratios answers one question about the business:

(A) Liquidity Ratio — this matches (III) To measure the short term Solvency. It tests the firm’s ability to meet its current obligations.

(B) Solvency Ratio — this matches (I) To check ability to meet long term contractual obligations. It tests the ability to service debt in the long run.

(C) Activity Ratio — this matches (IV) To measure the speed at which the activities of the business are being performed. Turnover ratios show how fast inventory, receivables and assets are turned into sales.

(D) Profitability Ratio — this matches (II) To analyse the earning capacity of Business. It relates profit to sales or to the resources employed.

NCERT (2026-27 edition):
Liquidity Ratios – “Liquidity ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations.”

NCERT (2026-27 edition):
Types of Ratios – “… 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.”