Question : Assertion (A): The current ratio assesses the firm’s ability to meet its short-term liabilities on time.
Reason (R): The current ratios assess the ability of the firm to meet its current liabilities immediately

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.

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

Question : Assertion (A): The difference between Total Assets and Current liabilities is capital employed.
Reason (R): Capital employed is a measure of a company's complete financial commitment to its operations, including any expansion or acquisition costs.

Question : Assertion (A): Current Assets/Current Liabilities is the formula for calculating the current ratio
Reason (R): The current ratio is derived by dividing current assets by current liabilities. Current assets are made up of spare parts, loose tools, and stores.

Question : Assertion (A): Current Liabilities are calculated by subtracting Working Capital from Current Assets.
Reason (R): Working Capital = Current Assets – Current Liabilities

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