Which of the following statements are True about ratio analysis-

(A) A ratio reflects quantitative and qualitative aspects of results.

(B) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount

(C) A ratio is always expressed as a quotient of one number divided by another.

(D) Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises.

Choose the correct answer from the options given below:

Analyzing each statement about ratio analysis:

(A) A ratio reflects quantitative and qualitative aspects of results

Ratios are purely quantitative in nature as they represent mathematical relationships between two numerical figures. While the interpretation of ratios may require qualitative judgment, the ratio itself only captures numerical data.

This statement is False.

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(B) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount

Long-term lenders and creditors evaluate a firm's solvency - its capacity to pay regular interest and repay the principal amount at maturity. This is precisely what solvency ratios (like Debt-Equity Ratio, Interest Coverage Ratio) measure.

This statement is True.

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(C) A ratio is always expressed as a quotient of one number divided by another

Ratios can be expressed in various forms:

• As a relationship: 2:1
• As times: 2 times
• As percentage: 20%
• As a pure ratio or fraction

The word "always" makes this statement incorrect since ratios need not be expressed only as quotients.

This statement is False.

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(D) Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises

This describes the fundamental purpose of ratio analysis:

• Intra-firm comparison → Comparing firm's performance across different periods (trend analysis)
• Inter-firm comparison → Comparing with other similar enterprises

This statement is True.

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Only statements (B) and (D) are true.

Correct Answer: Option 1