Lesson eLearning

Which of the following ratios best measures a company's ability to meet its short‑term obligations without raising new external capital?

hard MCQ 3 marks Class 12 · Accountancy · Analysis of Financial Statements
  1. Debt‑Equity ratio
  2. Current ratio
  3. Net Profit Margin
  4. Return on Equity
Answer
Current ratio

The correct answer is Current ratio — Hence the correct answer is Current Ratio.

Step-by-step solution

  1. Identify that the question asks for a ratio related to short‑term liquidity.
  2. Recall that the Current Ratio = Current Assets ÷ Current Liabilities.
  3. Select the option that lists Current Ratio.
  4. Hence the correct answer is Current Ratio.
Common mistake: Choosing Debt‑Equity ratio instead of Current Ratio

Concept tested: Liquidity Ratio

Published · How this solution was prepared and checked

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