Match List-I with List-II

List–I	List–II
(A) Profitability Ratios	(I) This refers to the ratios that are calculated for measuring the efficiency of operations of a business based on effective utilization of resources.
(B) Activity Ratios	(II) The ability of a business to pay the amount due to stakeholders as and when it is due.
(C) Liquidity Ratios	(III) The ability to meet its contractual obligations towards stakeholders, particularly towards external stakeholders.
(D) Solvency Ratios	(IV) It refers to the analysis of profits in relation to revenue from operations or funds (or assets) employed in the business.

Choose the correct answer from the options given below:

(A) Profitability Ratios → (IV)

Profitability ratios analyze profits in relation to revenue from operations or funds/assets employed in the business. Examples include Gross Profit Ratio, Net Profit Ratio, Return on Investment.

(B) Activity Ratios → (I)

Activity ratios (also called Turnover Ratios) measure the efficiency of operations based on effective utilization of resources. They show how quickly assets are converted into sales or cash. Examples include Inventory Turnover Ratio, Debtors Turnover Ratio.

(C) Liquidity Ratios → (II)

Liquidity ratios measure the ability of a business to pay amounts due to stakeholders as and when they become due. They focus on short-term payment capacity. Examples include Current Ratio, Quick Ratio.

(D) Solvency Ratios → (III)

Solvency ratios measure the ability to meet contractual obligations towards stakeholders, particularly external stakeholders. They focus on long-term financial stability. Examples include Debt to Equity Ratio, Interest Coverage Ratio.

The key distinction between liquidity and solvency is the time frame - liquidity deals with immediate/short-term obligations while solvency deals with long-term contractual obligations.

Correct Answer: Option 2