Match List-I with List-II

List-I	List-II
Accounting ratio	Type of accounting ratio
(A) Current ratio	(I) Liquidity ratios
(B) Stock turnover ratio	(II) Activity ratios
(C) Debt Equity ratio	(III) Solvency ratios
(D) Operating ratio	(IV) Profitability ratios

Choose the correct answer from the options given below:

(A) Current Ratio measures the relationship between current assets and current liabilities. Formula: $\frac{\text{Current Assets}}{\text{Current Liabilities}}$

It indicates the ability of a business to pay its short-term obligations. This is a Liquidity Ratio (I).

(B) Stock Turnover Ratio measures how efficiently inventory is converted into sales. Formula: $\frac{\text{Cost of Goods Sold}}{\text{Average Stock}}$

It shows the number of times inventory is sold and replaced during a period. This is an Activity Ratio (II) as it measures operational efficiency.

(C) Debt Equity Ratio measures the relationship between borrowed funds and owner's funds. Formula: $\frac{\text{Debt}}{\text{Equity}}$

It indicates the long-term financial stability and capital structure of the business. This is a Solvency Ratio (III).

(D) Operating Ratio expresses the relationship between operating costs and net sales. Formula: $\frac{\text{Cost of Goods Sold + Operating Expenses}}{\text{Net Sales}} \times 100$

It indicates the operational efficiency and profitability of the business. This is a Profitability Ratio (IV).

Correct matching:

• (A) → (I)
• (B) → (II)
• (C) → (III)
• (D) → (IV)

Correct Answer: Option 1