Question : Assertion (A): Liquidity Ratios provide information on the firm's capacity to satisfy its immediate financial obligations. Reason (R): The current ratio and quick ratio are two liquidity ratios that aid in determining a company's financial standing and ability to timely satisfy its short-term financial obligations.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False but Reason (R) is True.
Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Solution : A group of financial measurements known as liquidity ratios is used to assess a debtor's capacity to settle current debt commitments without the need for outside funding. The current ratio demonstrates the firm's capacity to fulfill its immediate obligations. Instead of being employed in inventory valuation, the current ratio is used to track a company's capacity to fulfill its obligations. Hence option 1 is the correct answer.
Question : Assertion (A): A company's long-term financial position is determined by its liquidity ratios: Reason (R): Liquidity ratios, such as the current ratio and quick ratio, are useful in determining the firm's long-term financial position.
Question : Assertion (A): Liquidity Ratios are used to evaluate a firm's long-term financial position. Reason (R): Liquidity ratios, such as the current ratio and quick ratio, are useful in determining the firm's long-term financial position.
Question : Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Activity Ratios are the ratios that are calculated for measuring the efficiency of operations of business
Question : Assertion (R): Profitability Ratios are the indicators of the profitability of the firm. Reason (R): Profitability Ratios, i.e., Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, Net Profit Ratio, and Return on Investment Ratio help in assessing the
Question : Assertion (A): The Current Ratio is unaffected by debt redemption. Reason (R): Debentures that are redeemable within a year have an impact on the current ratio.
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