Match List-I with List-II

List-I	List-II
(A) Liquidity Ratio	(I) Inventory Turnover ratio
(B) Solvency Ratio	(II) Quick Ratio
(C) Activity (or Turnover) Ratio	(III) Price earning ratio
(D) Profitability Ratio	(IV) Total asset to debt ratio

Choose the correct answer from the options given below:

Understanding Financial Ratio Categories

Each type of financial ratio serves a specific purpose in analyzing a company's financial performance. Let me match each category with its corresponding ratio:

---

(A) Liquidity Ratio → (II) Quick Ratio

Liquidity Ratios measure a company's ability to meet its short-term obligations using its current assets.

Quick Ratio = $\frac{\text{Current Assets - Inventory}}{\text{Current Liabilities}}$

This ratio shows immediate liquidity by excluding inventory (which takes time to convert to cash).

---

(B) Solvency Ratio → (IV) Total Asset to Debt Ratio

Solvency Ratios measure a company's ability to meet its long-term obligations and survive over a long period.

Total Asset to Debt Ratio = $\frac{\text{Total Assets}}{\text{Total Debt}}$

This ratio indicates whether the company has sufficient assets to cover its debts.

---

(C) Activity (or Turnover) Ratio → (I) Inventory Turnover Ratio

Activity Ratios measure how efficiently a company uses its assets to generate sales.

Inventory Turnover Ratio = $\frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

This ratio shows how many times inventory is sold and replaced during a period.

---

(D) Profitability Ratio → (III) Price Earning Ratio

Profitability Ratios measure a company's ability to generate profits relative to sales, assets, or equity.

Price Earning Ratio = $\frac{\text{Market Price per Share}}{\text{Earnings per Share}}$

This ratio indicates how much investors are willing to pay for each rupee of earnings.

---

Correct Matching: (A) - (II), (B) - (IV), (C) - (I), (D) - (III)

Answer: Option 1