Question:medium

Match List-I with List-II.
List-IList-II 
(A) Test of Activity(I) Acid Test Ratio
(B) Test of Liquidity(II) Debt Equity Ratio
(C) Test of Solvency(III) Debtor Turnover Ratio
(D) Test of Profitability(IV) Return on Investment Ratio

Updated On: Mar 26, 2026
  • (A)-(III), (B) - (I), (C)- (II), (D) - (IV)
  • (A)-(I), (B)-(II), (C)-(III), (D) - (IV)
  • (A)-(IV), (B) - (III), (C)- (II), (D) - (I)
  • (A)-(I), (B) - (IV), (C) - (III), (D) - (II)
Show Solution

The Correct Option is A

Solution and Explanation

The objective is to correlate financial ratios with their corresponding classifications. Each element from List-I must be accurately paired with an element from List-II. The categorization of each ratio will be determined by its definition:

  1. (A) Test of Activity: This category comprises ratios evaluating a company's asset utilization efficiency. The Debtor Turnover Ratio (III) quantifies the effectiveness of debt collection, establishing (A)-(III) as a valid correlation.
  2. (B) Test of Liquidity: This classification pertains to ratios assessing a company's capacity to fulfill its immediate liabilities. The Acid Test Ratio (I) serves as a critical measure of immediate solvency, making (B)-(I) a suitable pairing.
  3. (C) Test of Solvency: Solvency ratios are employed to gauge a company's ability to meet its long-term financial commitments. The Debt Equity Ratio (II) falls within this group, aligning (C)-(II).
  4. (D) Test of Profitability: This category includes ratios that measure a company's earnings generation capacity relative to its revenue. The Return on Investment Ratio (IV) evaluates this performance aspect, thus (D)-(IV) represents the correct association.

Consequently, the accurate pairing of List-I with List-II is identified as: (A)-(III), (B)-(I), (C)-(II), (D)-(IV).

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