When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as _______________.

Accounting ratio

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Financial ratio

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Costing ratio

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None of the above

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Solution

The correct option is A Accounting ratio
An accounting ratio compares two aspects of a financial statement, such as the relationship of current assets to current liabilities. The ratio can be used to evaluate the financial condition of a company, including the company's strength and weaknesses. Financial ratio evaluates company's operating and financial performance such as liquidity, profitability and solvency. Costing ratio evaluates the change with the level of production to the amount of revenues generated by production.

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