The current ratio of a firm is 2 : 1. If the firm purchased goods on credit, then how will it affect its current ratio?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Reduce
Buying goods on credit adds the same amount to current assets (stock) and to current liabilities (creditors). When the ratio is above 1, adding the same amount to both sides pulls it down towards 1.
Take current assets Rs. 50,000 and current liabilities Rs. 25,000 (2 : 1)
Goods bought on credit Rs. 10,000
Current assets = Rs. 60,000; current liabilities = Rs. 35,000
New current ratio = 60,000/35,000 = 1.71 : 1, lower than 2 : 1
Note: This question is from NCERT (2026-27). NTA sets numerical questions from NCERT too, so do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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