# Ratio Analysis - Liquidity Ratios - MCQs with answers

## Ratio Analysis - Liquidity Ratios - MCQs with answers

1. Which ratio is considered as safe margin of solvency?

a) Liquid ratio
b) Quick ratio
c) Current ratio
d) None of the above

ANSWER: c) Current ratio

2. The ideal level of current ratio is

a) 4:2
b) 2:1
c) Both a and b
d) None of the above

ANSWER: c) Both a and b

3. Current ratio is stated as a crude ratio because

a) It measures only the quantity of current assets
b) It measures only the quality of current assets
c) Both a and b
d) Offerings dimension

ANSWER: a) It measures only the quantity of current assets

4. Liquid ratio is also known as

a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio

a) A and B
b) A and C
c) B and C
d) C and D

ANSWER: a) A and B

5. Stock is considered as a liquid asset as anytime it can be converted into cash immediately.

a) Yes
b) No

6. The ideal level of liquid ratio is

a) 3:3
b) 4:4
c) 5:5
d) All of the above

7. Debt-equity ratio is a sub-part of

a) Short-term solvency ratio
b) Long-term solvency ratio
c) Debtors turnover ratio
d) None of the above

ANSWER: b) Long-term solvency ratio

8. Liquid assets is determined by

a) Current assets-stock-Prepaid expenses
b) Current assets +stock+ prepaid expenses
c) Current assets +Prepaid expenses
d) None of the above

ANSWER: a) Current assets-stock-Prepaid expenses

9. Which of the following is not included in current assets?

a) Debtors
b) Stock
c) Cash at bank
d) Cash in hand

10. Higher the ratio, the more favorable it is, doesnâ€™t stands true for

a) Operating ratio
b) Liquidity ratio
c) Net profit ratio
d) Stock turnover ratio

ANSWER: a) Operating ratio

11. The most precise test of liquidity is

a) Quick ratio
b) Current ratio
c) Absolute Liquid ratio
d) None of the above

ANSWER: c) Absolute Liquid ratio

12. Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.

a) Rs 54,000
b) Rs 60,000
c) Rs 1, 62,000
d) None of the above

ANSWER: a) Rs 54,000

13. Collection of debtors

a) Decreases current ratio
b) Increases current ratio
c) Has no effect on current ratio
d) None of the above

ANSWER: a) Decreases current ratio