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- ₹10,000.
Current ratio = Current assets/Current liabilities
2.5/1 = 50,000/20,000
To bring the ratio to 2:1, current assets is to be reduced.
Let current assets to be reduced by = x
Now, current ratio
2/1 = (50,000 - x)/20,000
(50,000 - x) = 40,000
x = 50,000 - 40,000
= 10,000
Thus, current assets to be reduced by ₹10,000 to make current ratio 2:1.