The current ratio is 2:1.
The impact of goods purchased on credit will:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Decrease the ratio
Current ratio = Current assets / Current liabilities. A credit purchase of goods adds the same amount to both: inventory (a current asset) goes up and trade payables (a current liability) go up. When a ratio is above 1:1 and the same amount is added to the top and the bottom, the ratio falls.
Say current assets = Rs. 50,000 and current liabilities = Rs. 25,000 (ratio 2:1).
Goods of Rs. 10,000 bought on credit: current assets = Rs. 60,000, current liabilities = Rs. 35,000.
New ratio = 60,000 / 35,000 = 1.71:1, which is lower than 2:1.
The ratio would stay unchanged only if it were 1:1, and the information given is enough to decide, so "No change" and "Incomplete information" do not fit.
NCERT (2026-27 edition):
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