The current ratio is 2.5: 1. Current assets are ₹50,000 and current liabilities are ₹20,000. How much must be the reduction in the current assets to bring the ratio to 2:1?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 10,000
Current ratio = Current assets ÷ Current liabilities. When only current assets fall, the current liabilities stay at Rs. 20,000, so the target level of current assets follows straight from the new ratio.
Current liabilities = Rs. 20,000
For a ratio of 2:1, current assets must be 2 × Rs. 20,000 = Rs. 40,000
Present current assets = Rs. 50,000
Reduction needed = Rs. 50,000 − Rs. 40,000 = Rs. 10,000
Check: Rs. 40,000 ÷ Rs. 20,000 = 2:1.
NCERT (2026-27 edition):
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