Financial Statements

Ratios

Medium

Every company analyse its earning capacity of the business which is outcome of utilisation of resources employed in the business. To analyse profitability company can use:

A. Dividend Payout Ratio

B. Return on Net Worth

C. Gross Profit Ratio

D. Quick Ratio

E. Inventory Turnover Ratio

Choose the choose answer from the option given below:

C and E only

C, D and E only

A, B and C only

A, C and E only

✅ Correct Option: 3

Profitability ratios measure earning capacity. Dividend Payout Ratio (A), Return on Net Worth (B) and Gross Profit Ratio (C) are profitability ratios. Quick Ratio (D) is a liquidity ratio, and Inventory Turnover Ratio (E) is an activity ratio. Hence the correct combination is A, B and C only.

2025: 14 May Shift 1

The _________ may indicate that the firm is experiencing stockouts and lost sales.

2024

Calculate Trade Payables Turnover Ratio.

2026: 21 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A.	The ratio provides a measure of the capacity of the business to meet its short-term obligations without any flaw.	I. Total Assets to Debt Ratio
B.	This ratio measures the extent of the coverage of long-term debts by assets.	II. Interest Coverage Ratio
C.	This ratio indicates the number of times receivables are turned over and converted into cash in an accounting period.	III. Quick Ratio
D.	It is a ratio which deals with the servicing of interest on loans. It is a measure of security of interest payable on long-term debts.	IV. Trade Receivables Turnover Ratio

Choose the correct answer from the options given below:

2024

Calculate Average Payment Period.

2026: 29 May Shift 2

The current ratio is 2 : 1. Which of the following transactions would improve, reduce or change the current ratio? Match List-I with List-II

LIST-I		LIST-II
A.	Payment of unclaimed dividend	I.	Improve
B.	Purchase of Machinery against Issue of Shares	II.	Reduce
C.	Sale of goods on credit	III.	Will not be recorded
D.	Purchased goods on credit	IV.	Does not Change

Choose the correct answer from the options given below:

2022: 8 Aug Shift 2

When the ratio is low, the firm is said to have favourable indication.

Solution

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