Match List-I with List-II

List – I	List – II
Accounting Ratio	Accounting Ratio
Current ratio	Liquidity ratios
Stock turnover ratio	Activity ratios
Debt Equity ratio	Solvency ratios
Operating ratio	Profitability ratios

Choose the correct answer from the options given below:

The correct answer is (A) - (I), (B) - (II), (C) - (III), (D) - (IV).

To understand why this is the correct matching, let us analyze each accounting ratio and its respective category step-by-step:

1. Current Ratio matches with Liquidity Ratios (A - I):
Liquidity ratios measure a company's ability to meet its short-term financial obligations as they become due. The Current Ratio is a primary liquidity metric, calculated as:
$$\text{Current Ratio}=\frac{\text{Current Assets}}{\text{Current Liabilities}}$$
It indicates whether the company has sufficient short-term assets to cover its short-term debts. Therefore, Current Ratio is classified under Liquidity Ratios.

2. Stock Turnover Ratio matches with Activity Ratios (B - II):
Activity ratios (also known as efficiency or turnover ratios) evaluate how effectively a company uses and manages its assets to generate sales or cash. The Stock Turnover Ratio (or Inventory Turnover Ratio) measures how many times a company sells and replaces its inventory over a specific period. It is calculated as:
$$\text{Stock Turnover Ratio}=\frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$$
Since it reflects operational efficiency in managing stock, it is classified under Activity Ratios.

3. Debt Equity Ratio matches with Solvency Ratios (C - III):
Solvency ratios measure a firm's long-term ability to meet its total debt obligations and sustain operations over the long run. The Debt Equity Ratio compares a company's total long-term debt liabilities to its shareholders' equity, calculated as:
$$\text{Debt Equity Ratio}=\frac{\text{Total Long-term Debt}}{\text{Shareholders' Equity}}$$
It shows the proportion of financing provided by creditors relative to owners, making it a key Solvency Ratio.

4. Operating Ratio matches with Profitability Ratios (D - IV):
Profitability ratios measure a company's ability to generate earnings relative to its sales, assets, or equity. The Operating Ratio determines the operational efficiency of the organization by comparing operating expenses to net sales, calculated as:
$$\text{Operating Ratio}=\frac{\text{Cost of Goods Sold}+\text{Operating Expenses}}{\text{Net Sales}}\times 100$$
A lower operating ratio indicates higher operational profitability, placing it firmly under Profitability Ratios.

Thus, by matching each item from List-I with its corresponding classification in List-II, we obtain:
(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