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 based on effective utilisation of resources.
Reason (R): Current ratio and Quick Ratio are liquidity ratios.
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 not the correct explanation of Assertion (A).
Solution : Any form of financial indicator that aids investors and research analysts in determining how effectively a firm uses its assets to create revenues and cash is referred to as an activity ratio.
Hence the correct answer is option 2.
