Match List I with List II:
Correct Answer :
A-IV, B-III, C-I, D-II
Solution :
The correct option is A-IV, B-III, C-I, D-II.
To understand why this match is correct, let us analyze each financial ratio listed in List I and align it with its classification in List II:
1. A. Operating Profit Ratio matches with IV. Profitability Ratios:
Profitability ratios measure a company's capability to generate earnings relative to its sales, assets, or equity. The Operating Profit Ratio determines the operational efficiency of the enterprise by expressing the operating profit as a percentage of revenue from operations.
2. B. Working Capital Turnover Ratio matches with III. Activity Ratios:
Activity ratios (also called efficiency or turnover ratios) measure how effectively a business utilizes its resources and assets. The Working Capital Turnover Ratio indicates how efficiently a company uses its working capital to generate sales or revenue.
3. C. Debt-Equity Ratio matches with I. Solvency Ratios:
Solvency ratios evaluate a company's ability to meet its long-term debt obligations and financial commitments. The Debt-Equity Ratio measures the proportion of capital provided by lenders (debt) relative to that provided by shareholders (equity), reflecting the long-term solvency position of the business.
4. D. Quick Ratio matches with II. Liquidity Ratios:
Liquidity ratios assess a business's ability to fulfill its short-term financial obligations as they fall due. The Quick Ratio (or Acid-Test Ratio) is a strict liquidity metric that compares highly liquid assets (excluding inventory and prepaid expenses) directly against current liabilities.
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