Question
Match the following Ratios A)Â Â Â Â Overall
profitability ratio                      1) Gearing Ratio B)     Efficiency ratio                   2) return on capital employed C)     Capital structure ratio                           3) Acid test ratio D)    Liquidity Ratio                    4) working capital turnover ÂSolution
Return on Capital Employed is an Overall Profitability ratio Efficiency Ratios: The efficiency ratio is used to analyse how well a company uses its assets and liabilities internally. An efficiency ratio can calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity, and the general use of inventory and machinery. Therefore, Working Capital Turnover Ratio is an efficiency ratio. Gearing Ratio, which is a company’s debt divided by its shareholders’ equity, is a Capital Structure Ratio Acid Ratio is a Liquidity Ratio.
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