This question requires matching various accounting ratios found in List-I with their corresponding types of accounting ratios from List-II. Understanding the purpose of each ratio is key to classifying it correctly.

Ratio Classification: Current Ratio

The Current ratio is calculated as:

$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$

It measures a company's ability to pay its short-term obligations (debts due within one year) using its short-term assets. Therefore, it is a measure of liquidity.

Match: (A) - (I) Liquidity ratios

Ratio Classification: Stock Turnover Ratio

The Stock turnover ratio (or Inventory Turnover Ratio) is calculated as:

$\text{Stock Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

This ratio indicates how efficiently a company manages its inventory. It shows how many times inventory is sold and replaced over a period. Ratios measuring the efficiency of asset utilization fall under activity ratios.

Match: (B) - (II) Activity ratios

Ratio Classification: Debt Equity Ratio

The Debt Equity ratio is calculated as:

$\text{Debt Equity Ratio} = \frac{\text{Total Debt}}{\text{Total Equity}}$

This ratio assesses a company's financial leverage by comparing its total debt to its total shareholders' equity. It indicates the extent to which a company relies on debt financing versus equity financing, reflecting its long-term financial stability and risk. This falls under solvency ratios.

Match: (C) - (III) Solvency ratios

Ratio Classification: Operating Ratio

The Operating ratio is calculated as:

$\text{Operating Ratio} = \frac{\text{Operating Expenses}}{\text{Net Sales}} \times 100$

This ratio measures how efficiently a company is managing its operations. It reflects the proportion of revenue consumed by operating expenses. A lower ratio indicates better operational efficiency and higher profitability. Therefore, it is classified under profitability ratios.

Match: (D) - (IV) Profitability ratios

Summary of Matches

Based on the analysis of each ratio:

• (A) Current ratio - Liquidity ratios (I)
• (B) Stock turnover ratio - Activity ratios (II)
• (C) Debt Equity ratio - Solvency ratios (III)
• (D) Operating ratio - Profitability ratios (IV)

The correct option that matches List-I with List-II accordingly is option 1.