The __________ classification based on the purpose for which a ratio is computed, is the most commonly used classification.

Traditional

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Modern

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Functional

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None of the above

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Solution

The correct option is D Functional
The functional classification is based on the purpose for which a ratio is computed and is the most commonly used classification. Some examples of Functional ratios are Liquidity ratios, Solvency ratios, Activity ratios etc.

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