S1: The Current Ratio measures long-term solvency. S2: The Debt-Equity Ratio measures short-term liquidity. Which statement(s) is/are correct? MCQ with Answer and Explanation

S1: The Current Ratio measures long-term solvency. S2: The Debt-Equity Ratio measures short-term liquidity. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. Both S1 and S2
C. S2 only
D. S1 only
Answer: Option A
Solution (By JKSSB Mock Tests)
The Current Ratio measures short-term liquidity, not long-term solvency. The Debt-Equity Ratio measures long-term solvency, not short-term liquidity. Both statements have swapped the definitions. Both are incorrect.

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Practice More Accountancy and Book Keeping Questions

Question #1
The 'GST on Non-Affordable Housing' (other than affordable) is:
A. 5% without ITC
B. 28%
C. 18%
D. 12% with ITC

Correct Answer: Option A


Explanation:
Non-affordable residential real estate projects are taxed at 5% without ITC.

Question #2
For calculating the Current Ratio, which of the following is excluded from Current Assets?
A. Prepaid Expenses
B. Cash at Bank
C. Loose Tools
D. Sundry Debtors

Correct Answer: Option C


Explanation:
Loose tools and spares are generally excluded from current assets while calculating liquidity ratios because they cannot be easily converted into cash to pay off liabilities.

Question #3
The 'Return Inward Book' is also known as:
A. Cash Book
B. Journal
C. Sales Returns Book
D. Purchase Returns Book

Correct Answer: Option C


Explanation:
Returns inward means goods returned by customers, i.e., sales returns.