Match List I with List II. List I List II A. Liquidity Ratio I. Debt-…

Match List I with List II.

List I	List II
A. Liquidity Ratio	I. Debt-Equity Ratio
B. Solvency Ratio	II. Fixed Asset turnover Ratio
C. Activity Ratio	III. Quick Ratio
D. Profitability Ratio	IV. Earning per share

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → A-III, B-I, C-II, D-IV

(A) Liquidity Ratio — this matches (III) Quick Ratio. Quick (acid-test) ratio measures short-term solvency, with current ratio.

(B) Solvency Ratio — this matches (I) Debt-Equity Ratio. It tests the long-term ability to service debt.

(C) Activity Ratio — this matches (II) Fixed Asset turnover Ratio. Turnover ratios show how well the assets are used to generate sales.

(D) Profitability Ratio — this matches (IV) Earning per share. EPS measures the earning capacity per equity share.

NCERT (2026-27 edition):
Summary – “… 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):
Summary – “… 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’.”