Question

Given below are two statements:
Statement I: Higher the current ratio, the better will be the financial position of the business.
Statement II: Cropping intensity is expressed as: CI = (Net Sown Area/Cropped Area) * 100
In the light of the above statements, choose the most appropriate answer from the options below:

• A. Both Statement I and Statement II are correct
• B. Both Statement I and Statement II are incorrect
• C. Statement I is correct but Statement II is incorrect
• D. Statement I is incorrect but Statement II is correct

Hint:

Cropping intensity must always be $\geq 100\%$. Since Net Sown Area $\leq$ Gross Cropped Area, Net Sown Area must always be in the denominator to get a percentage $\geq 100\%$.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Evaluating business performance requires standard liquidity ratios, while evaluating agricultural productivity requires key land-use efficiency indices.

Step 2: Detailed Explanation:
Let us assess both statements:
- Statement I: The current ratio is a liquidity ratio measuring a firm's ability to cover its short-term obligations with its short-term assets. In general, a higher current ratio (typically around 2:1) indicates a stronger short-term financial position and lower risk of insolvency. Thus, Statement I is correct.
- Statement II: Cropping intensity (CI) measures land-use efficiency. It is mathematically defined as:
\[ \text{CI} = \frac{\text{Gross Cropped Area}}{\text{Net Sown Area}} \times 100 \]
The formula given in Statement II is inverted, placing Net Sown Area in the numerator. Thus, Statement II is incorrect.
Therefore, Statement I is correct but Statement II is incorrect.

Step 3: Final Answer:
The correct option is (C).