Question

Match List-I with List-II.

List-I	List-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

• A. (A)-(III), (B) - (I), (C)- (II), (D) - (IV)
• B. (A)-(I), (B)-(II), (C)-(III), (D) - (IV)
• C. (A)-(IV), (B) - (III), (C)- (II), (D) - (I)
• D. (A)-(I), (B) - (IV), (C) - (III), (D) - (II)

Answer 1

The Correct Option is A

The problem involves matching financial ratios with their respective categories. Each item in List-I needs to be paired correctly with an item from List-II. We'll break down which ratio belongs to which category by understanding their definitions: 

1. (A) Test of Activity: This refers to ratios that measure how effectively a company is using its assets. The Debtor Turnover Ratio (III) measures how efficiently a company collects its debts, making (A)-(III) a logical match.
2. (B) Test of Liquidity: This tests a company's ability to meet its short-term obligations. The Acid Test Ratio (I) is a stringent indicator of liquidity, so (B)-(I) is appropriate.
3. (C) Test of Solvency: Solvency ratios assess a company's ability to meet long-term obligations. The Debt Equity Ratio (II) falls under this category, pairing (C)-(II).
4. (D) Test of Profitability: This examines a company's ability to generate earnings relative to revenue. The Return on Investment Ratio (IV) assesses this capability, hence (D)-(IV) is the correct match.

Based on this analysis, the correct matching of List-I with List-II is: (A)-(III), (B)-(I), (C)-(II), (D)-(IV).

Answer 2

Let's analyze the given options and match them accordingly:

• Test of Activity:
  The test of activity is concerned with how efficiently the company is utilizing its assets. The Debtor Turnover Ratio is a measure of how quickly the company collects its receivables, which is related to the efficiency of the company in managing its debts or receivables.
  Thus, (A) Test of Activity matches with (III) Debtor Turnover Ratio.
• Test of Liquidity:
  Liquidity is about the ability of a company to meet its short-term obligations. The Acid Test Ratio (also known as the Quick Ratio) is used to measure a company's ability to cover its short-term obligations with its most liquid assets.
  Therefore, (B) Test of Liquidity matches with (I) Acid Test Ratio.
• Test of Solvency:
  Solvency refers to the company’s ability to meet its long-term debts and financial obligations. The Debt Equity Ratio is a measure that compares the company’s total debt to its equity, helping assess its financial leverage and long-term solvency.
  Hence, (C) Test of Solvency matches with (II) Debt Equity Ratio.
• Test of Profitability:
  Profitability refers to the ability of a company to generate earnings relative to its revenue, assets, or equity. The Return on Investment Ratio measures how well a company generates profits from its investments.
  Consequently, (D) Test of Profitability matches with (IV) Return on Investment Ratio.

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