Choose the right answer:

(i) The following groups of ratios are primarily measure risk:
A. liquidity, activity, and profitability B. liquidity, activity, and inventory C. liquidity, activity, and debt D. liquidity, debt and profitability

(ii) Th

Question

Choose the right answer:

(i) The following groups of ratios are primarily measure risk:
  A. liquidity, activity, and profitability   B. liquidity, activity, and inventory   C. liquidity, activity, and debt   D. liquidity, debt and profitability

(ii) The _________ ratios are primarily measures of return:
  A. liquidity   B. activity   C. debt   D. profitability

(iii) The _________ of business firm is measured by its ability to satisfy its short-term obligations as they become due:
  A. activity   B. liquidity   C. debt   D. profitability

(iv) _________ ratios are a measure of the speed with which various accounts are converted into revenue from operations or cash:
  A. activity   B. liquidity   C. debt   D. profitability

(v) The two basic measures of liquidity are:
  A. inventory turnover and current ratio   B. current ratio and liquid ratio   C. gross profit margin and operating ratio   D. current ratio and average collection period

(vi) The _________ is a measure of liquidity which excludes _______, generally the least liquid asset:
  A. current ratio, trade receivable   B. liquid ratio, trade receivable   C. current ratio, inventory   D. liquid ratio, inventory

Accepted Answer

**(i) D — liquidity, debt and profitability.** These are the groups the textbook associates with the risk profile of a firm.

**(ii) D — profitability.** Profitability ratios measure the return, i.e. the earnings the business generates on its revenue and resources.

**(iii) B — liquidity.** Liquidity is the firm's ability to satisfy its short-term obligations as they become due.

**(iv) A — activity.** Activity (turnover) ratios measure the speed with which various accounts are converted into revenue from operations or cash. …

Particulars	Note No.	Previous Year (₹)	Current Year (₹)	Absolute Change (₹)	Percentage Change (%)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital
(b) Reserves and Surplus
2. Non-Current Liabilities
(a) Long-term Borrowings
3. Current Liabilities
(a) Trade Payables
(b) Short-term Provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets
(b) Non-Current Investments
2. Current Assets
(a) Inventories
(b) Trade Receivables
(c) Cash and Cash Equivalents
Total

Q.Choose the right answer:

Concept understanding — Ratio Analysis

What the NCERT textbook says

Why does it matter?

Accounting treatment: No debit/credit

Where a format/proforma is given

#	Answer	Why
(i)	D	Liquidity, debt and profitability are the groups linked to a firm's risk profile.
(ii)	D	Profitability ratios measure the return (earnings) the business generates.
(iii)	B	Liquidity is the ability to satisfy short-term obligations as they fall due.
(iv)	A	Activity (turnover) ratios measure the speed of converting accounts into revenue or cash.

Q.Choose the right answer:

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