Match List I with List IIList IList IIA. Debt Equity RatioI. Primaril…

Match List I with List II

List I	List II
A. Debt Equity Ratio	I. Primarily indicates the rate of external funds in financing assets.
B. Total assets to Debt ratio	II. Higher proportion provides security to creditors
C. Proprietary ratio	III. It reveals the efficiency of business in utilization of funds
D. Return on Investment	IV. It measures degree of indebtness of an enterprise

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

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

(A) Debt Equity Ratio — this matches (IV) It measures degree of indebtness of an enterprise. It compares long-term debt with equity, so it shows how heavily the business depends on borrowed funds.

(B) Total assets to Debt ratio — this matches (I) Primarily indicates the rate of external funds in financing assets. It shows how far the long-term debts are covered by the assets.

(C) Proprietary ratio — this matches (II) Higher proportion provides security to creditors. A higher share of shareholders' funds in financing the assets is a safety margin for creditors.

(D) Return on Investment — this matches (III) It reveals the efficiency of business in utilization of funds. It relates profit before interest and tax to the capital employed.

NCERT (2026-27 edition):
Debt-Equity Ratio – “… Significance: This ratio measures the degree of indebtedness of an enterprise and gives an idea to the long-term lender regarding extent of security of the debt.”

NCERT (2026-27 edition):
Total Assets to Debt Ratio – “… It is better to take the net assets (capital employed) instead of total assets for computing this ratio also. It is observed that in that case, the ratio is the reciprocal of the debt to capital employed ratio. Significance: This ratio primarily indicates the rate of external funds in financing the assets and the extent of coverage of their debts are covered by assets.”

NCERT (2026-27 edition):
Proprietary Ratio – “… Significance: Higher proportion of shareholders funds in financing the assets is a positive feature as it provides security to creditors.”

NCERT (2026-27 edition):
Return on Capital Employed or Investment – “… Significance: It measures return on capital employed in the business. It reveals the efficiency of the business in utilisation of funds entrusted to it by shareholders, debenture-holders and long-term loans.”