Which ratio measures the short-term solvency of a firm? MCQ with Answer and Explanation

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Which ratio measures the short-term solvency of a firm?

A. Interest Coverage Ratio

B. Proprietary Ratio

C. Debt-Equity Ratio

D. Current Ratio

Answer: Option D

Solution (By JKSSB Mock Tests)

The Current Ratio compares current assets to current liabilities, indicating the firm's ability to meet its short-term obligations.

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

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Question #1

Direct taxes are progressive in nature because:

A. Rate increases with income level

B. Rate is same for all

C. They are collected indirectly

D. They are only on goods

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Correct Answer: Option A

Explanation:
Direct taxes like income tax have higher rates for higher income slabs, making them progressive.

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Question #2

For real accounts, the rule is:

A. None of these

B. Debit the receiver, Credit the giver

C. Debit what comes in, Credit what goes out

D. Debit expenses and losses, Credit incomes and gains

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Correct Answer: Option C

Explanation:
Real accounts (assets) follow: Debit what comes in, credit what goes out.

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

Question #3

If a business purchases goods worth ₹60,000 paying ₹20,000 cash and the balance on credit, the accounting equation will show:

A. Increase in assets ₹60,000, increase in liabilities ₹60,000

B. Increase in assets ₹60,000, increase in liabilities ₹40,000, decrease in capital ₹20,000

C. Increase in assets ₹40,000, increase in liabilities ₹40,000

D. Increase in assets ₹60,000, increase in liabilities ₹40,000, decrease in capital ₹0

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Correct Answer: Option D

Explanation:
Assets increase by ₹60,000 (stock), cash decreases by ₹20,000, net assets increase ₹40,000; liabilities increase by ₹40,000 (creditors). Capital is unchanged. Equation: Assets = Liabilities + Capital, here +40,000 = +40,000 + 0.

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

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