Financial ratios are traditionally grouped in all but which of the following categories?

• A. Profitability ratios
• B. Liquidity ratios
• C. Inventory costing ratios
• D. Solvency ratios

Answer: (C)

Verified step by step guidance

1. Understand the concept of financial ratios: Financial ratios are tools used to evaluate a company's financial performance and position. They are typically grouped into categories based on the type of information they provide.
2. Review the common categories of financial ratios: The main categories include profitability ratios (measuring a company's ability to generate profit), liquidity ratios (assessing a company's ability to meet short-term obligations), and solvency ratios (evaluating a company's ability to meet long-term obligations).
3. Analyze the term 'Inventory costing ratios': Inventory costing ratios are not traditionally considered a category of financial ratios. Instead, they are related to inventory management and costing methods, such as FIFO (First-In, First-Out) or LIFO (Last-In, First-Out).
4. Compare the given options: Profitability ratios, liquidity ratios, and solvency ratios are established categories of financial ratios, while inventory costing ratios do not fit into these traditional categories.
5. Conclude that the correct answer is 'Inventory costing ratios,' as it is not a traditional category of financial ratios.