MCQ TEST RATIO ANALYSIS

1. In the Current Ratio formula , what is on the numerator?

• Current Liabilities

• Current Assets

• Fixed Assets

• Working Capital

Which of these is a liquidity ratio?

• a) Debt-to-Equity Ratio

• b) Current Ratio

• c) Return on Capital Employed

• d) Inventory Turnover Ratio

Answer explanation

The liquidity ratio is like the financial “water bottle test” for a business — it checks if the company has enough “liquid” (short-term assets) to quench its short-term “thirst” (liabilities).

Too low? The business might be parched. Too high? It might be hoarding cash instead of investing it to grow.

The formula for Debt-to-Equity Ratio has which item in the denominator?

• Shareholders’ Equity

• Long-term Debt

• Total Assets

• Working Capital

In the Quick Ratio formula, which asset is excluded from Current Assets?

• Cash

• Inventory

• Debtors

• Marketable securities

Which of the following is a solvency ratio?

• Quick Ratio

• Debt-to-Equity Ratio

• Current Ratio

• Gross Profit Ratio

The Inventory Turnover Ratio is calculated as

• Cost of Goods Sold ÷ Average Inventory

• Sales ÷ Current Assets

• Sales ÷ Fixed Assets

• Operating Profit ÷ Average Inventory

If the Current Ratio is 2:1, which of the following can be a possible set of values?

• Current Assets ₹1,00,000; Current Liabilities ₹50,000

• Current Assets ₹80,000; Current Liabilities ₹1,00,000

• Current Assets ₹1,00,000; Current Liabilities ₹1,00,000

• Current Assets ₹50,000; Current Liabilities ₹1,00,000

In the formula for Return on Equity (ROE), the denominator is:

• Net Profit

• Shareholders’ Equity

• Total Assets

• Current Liabilities

The Debtors Turnover Ratio is used to measure:

• Liquidity of inventory

• Efficiency of credit collection

• Profitability

• Solvency

In Working Capital calculation, the formula is:

• Current asset +Current Liability

• Current Assets-Current Liability

• Fixed Asset + Current liabilities

• Fixed Asset -Current liabilities