Match the items of List-I with those of List-II and indicate the correct code : Codes :List – I List – II a. Acid Test Ratio i. Profitability analysis b. Debt Service Coverage Ratio ii. Activity analysis c. Debt Equity Ratio iii. Liquidity analysis d. Stock Turnover Ratio iv. Long-term solvency analysis
Financial Ratio Analysis Matching
The question asks to match financial ratios (List-I) with their corresponding analysis types (List-II). Let's analyze each item:
Matching Financial Ratios to Analysis Types
- a. Acid Test Ratio: This ratio assesses a company's ability to meet its short-term obligations using its most liquid assets (excluding inventory). It is a key indicator for Liquidity analysis. Thus, a matches with iii.
- b. Debt Service Coverage Ratio (DSCR): This ratio measures the cash flow available to pay current debt obligations. It reflects the company's ability to generate sufficient earnings or cash to service its debt. In the context of the options provided, it is best aligned with Profitability analysis, evaluating if profits adequately cover debt service. Thus, b matches with i.
- c. Debt Equity Ratio: This ratio compares a company's total debt to its shareholder equity, indicating its financial leverage. It is crucial for assessing Long-term solvency analysis. Thus, c matches with iv.
- d. Stock Turnover Ratio: This ratio measures how efficiently a company manages its inventory by calculating how many times inventory is sold and replaced over a period. It is a fundamental measure in Activity analysis. Thus, d matches with ii.
Correct Code Determination
Combining the matches:
- a - iii
- b - i
- c - iv
- d - ii
This corresponds to the code a-iii, b-i, c-iv, d-ii.
| List-I Item | List-II Analysis Type | Match |
| a. Acid Test Ratio | iii. Liquidity analysis | a-iii |
| b. Debt Service Coverage Ratio | i. Profitability analysis | b-i |
| c. Debt Equity Ratio | iv. Long-term solvency analysis | c-iv |
| d. Stock Turnover Ratio | ii. Activity analysis | d-ii |
Important Questions from Ratio analysis
A company sold 20% of the goods on cash basis and balance on credit basis. Debtors are allowed \(1\frac{1}{2}\) months’ credit and their balances as on 31st March, 2023 is Rs. 1,25,000. Assume that the sale is uniform throughout the year. Credit sales would be
The amount of closing stock would be, when
Sales - Rs. 6,00,000
Opening Stock - Rs. 50,000
Purchases - Rs. 5,00,000
Productive Wages - Rs. 10,000
Carriage Inwards - Rs. 7,000
Rate of Gross Profit on cost - 20%
Match List–I with List–II :
List I
(Useful ratio)
List II
(Symptom)
(a)
Finished goods turnover ratio (i)
Liquidity crisis (b)
Interest coverage ratio (ii)
Inability to pay dues to financial institutions (c)
Debt-service coverage ratio (iii)
Inability to pay interest (d)
Current ratio and quick ratio (iv)
Falling demand for the product in the market
Select the correct answer using the codes given below.Consider the below mentioned statements and state the correct code of the statements being true or false.
Statement (I): A debt-equity ratio of 2 : 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.
Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt
Code:
Debt Service Coverage Ratio indicates which one of the following?
