Pick up the ratio which gives us sufficient information by which to judge the financial condition and performance of the firm, from the following: A. Liquidity ratio B. Financial leverage ratio C. Activity ratio D. None of these

The correct answer is: A. Liquidity ratio.

Liquidity ratios measure a company’s ability

to meet its short-term obligations. They are calculated by dividing a company’s current assets by its current liabilities. A high liquidity ratio indicates that a company has a good ability to pay its short-term debts.

Financial leverage ratios measure a company’s use of debt financing. They are calculated by dividing a company’s debt by its equity. A high financial leverage ratio indicates that a company is using a lot of debt financing.

Activity ratios measure a company’s efficiency in using its assets. They are calculated by dividing a company’s sales by its assets. A high activity ratio indicates that a company is using its assets efficiently.

Therefore, the correct answer is A. Liquidity ratio.