The financial ratio that measures short-term solvency is: MCQ with Answer and Explanation

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The financial ratio that measures short-term solvency is:

A. Return on investment

B. Debt-equity ratio

C. Gross profit ratio

D. Current ratio

Answer: Option D

Solution (By JKSSB Mock Tests)

Current ratio assesses the ability to meet short-term obligations.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

When goods are distributed as free samples, the adjustment entry requires:

A. Debiting Free Samples A/c, Crediting Cash A/c

B. Debiting Advertisement A/c, Crediting Trading A/c (or Purchases A/c)

C. Debiting P&L A/c, Crediting Sales A/c

D. Debiting Purchases A/c, Crediting Advertisement A/c

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Correct Answer: Option B

Explanation:
Free samples are an advertising expense (debit), and they reduce the stock of purchased goods at cost price (credit Purchases/Trading).

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Question #2

Social accounting is primarily concerned with:

A. Calculating national income and economic performance of the country

B. Minimizing corporate taxes

C. Maximizing shareholder wealth

D. Recording petty cash expenses

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Correct Answer: Option A

Explanation:
At a macro level, social accounting (or national income accounting) measures the economic activity, income, and expenditure of a nation.

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Question #3

Which of the following is an indirect tax?

A. Wealth Tax

B. Corporate Tax

C. Income Tax

D. Goods and Services Tax (GST)

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Correct Answer: Option D

Explanation:
GST is an indirect tax because the liability to pay is on the seller, but the burden is passed on to the consumer.

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