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 efficient use of a firm’s resources to generate profit.
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 and Reason (R) is also False.
Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Solution : The ability of a business to create money (profit) in relation to sales, balance sheet assets, operating costs, and shareholders' equity over a given time period is measured and evaluated by analysts and investors using profitability ratios. The utilization of a firm's resources efficiently to produce profit is evaluated with the aid of profitability ratios, such as the gross profit ratio, operating ratio, operating profit ratio, net profit ratio, and return on investment ratio. Hence option 1 is the correct answer.
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 : 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 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
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 (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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