Financial Statements

Ratios

Medium

Which one of the following statements is true?

Liquidity ratios measure long term solvency of a concern.

Solvency ratio is a part of long term solvency

Stock is part of liquid assets.

Gross profit ratio measures overall profitability of a concern.

✅ Correct Option: 2

Liquidity ratios measure short-term (not long-term) solvency. Stock is excluded from liquid assets because it is not readily convertible into cash. Gross profit ratio measures trading efficiency, not overall profitability; net profit ratio does that. Solvency ratios indeed measure long-term solvency of a firm, so option (b) is correct.

2026: 13 May Shift 1

Match List-I with List-II

List-I (ACCOUNTING RATIO)	List-II (CATEGORY)
(A) Total Assets to Debt Ratio	(I) Profitability Ratio
(B) Investment (Net assets) Turnover Ratio	(II) Solvency Ratio
(C) Acid-Test Ratio	(III) Activity Ratio
(D) Return on Investment	(IV) Liquidity Ratio

Choose the correct answer from the options given below:

2022: 15 July Shift 2

The ratios calculated to measure the short term commitments of business is

2025: 14 May Shift 2

Return on Shareholders' Funds

2022: 16 July Shift 2

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:

2025: 27 May Shift 2

Calculate 'Liquid Ratio' from the following information:

Current liabilities	Rs. 50,000
Current assets	Rs. 80,000
Inventories	Rs. 20,000
Advance tax	Rs. 5,000
Prepaid expenses	Rs. 5,000

2026: 29 May Shift 1

Calculate current assets of a company from the following information:

Inventory turnover ratio = 4 times

Inventory at the end is Rs. 20,000 more than the inventory in the beginning. Revenue from Operations Rs. 3,00,000 and gross profit ratio is 20% of revenue from operations.

Current liabilities = Rs. 40,000

Quick ratio = 0.75 : 1

Which one of the following statements is true?

Solution

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