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 two basic measures of liquidity are:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Current Ratio & Liquid Ratio
Liquidity is the ability to pay current liabilities out of current assets. The current ratio (current assets ÷ current liabilities) and the liquid (quick) ratio (liquid assets ÷ current liabilities) are the two ratios of this group.
Option (1) Inventory turnover and Current Ratio — Incorrect. Inventory turnover is an activity ratio.
Option (3) Gross Profit Ratio & Operating Ratio — Incorrect. Both are profitability ratios.
Option (4) Current Ratio and average collection period — Incorrect. The average collection period comes from the trade receivables turnover ratio, an activity ratio.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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