Sale of inventories at loss on credit
Current liabilities remain unchanged and the sale of inventory at loss makes current assets to be decreased by the amount of profit. So, the current ratio reduced.
Lets assume Current assets is ₹200000 and current liabilities is ₹100000. Goods are sold for ₹50000 whereas book value is ₹60000 which means debtors is increased by ₹50000 and stock is deducted by ₹60000. means overall current assets is decreased by 10000. So new current assets is 190000 and current liabilities is of ₹100000. So current ratio is 1.9:1. |
