Question : Assertion (A): Activity ratios are calculated for measuring the efficiency of operations of a business based on the effective utilization of resources.
Reason (R): The current ratio, Quick ratio, asset turnover ratio, inventory ratio, account receivables turnover, etc are included in the Activity ratios
Option 1: Both A and R are true and R is the correct explanation of A.
Option 2: Both A and R are true, but R is not the correct explanation of A.
Option 3: A is true, but R is false.
Option 4: A is false, but R is true.
Correct Answer:
Both A and R are true and R is the correct explanation of A.
Solution :
A financial indicator called an activity ratio shows how effectively a company is using the assets on its balance sheet to produce revenue and cash.
The quick ratio, inventory ratio, account receivables turnover, and current ratio are examples of activity ratios.
Hence option 1 is the correct answer.
