A Company's Current Assets are ₹8,00,000 and its current liabilities are ₹4,00,000. Subsequently, it purchased goods for ₹1,00,000 on credit. Current ratio will be:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 1.8 : 1.
Current Assets are ₹8,00,000 and its current liabilities are ₹4,00,000. On purchase of goods for ₹1,00,000 on credit, Current assets & current liabilities will be increased by the same amount. As stock is increased by the amount of ₹1,00,000 and creditors also increased by ₹1,00,000.
New Current Assets = 8,00,000 + 1,00,000
= 9,00,000
New Current Liabilities = 4,00,000 + 1,00,000
= 5,00,000
Current Ratio = Current assets/Current liabilities
= 9,00,000/5,00,000
= 1.8:1