Current Assets of a Company were Rs 1,00,000 and its current ratio was 2 : 1. After this the company paid Rs 25,000 to a Trade Payable. The Current Ratio after the payment will be :

03:01

The correct answer is option 3- 03:01.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = 2/1
1,00,000/Current Liabilities =2/1
Current liabilities = 100000/2
Current Liabilities = 50,000
After Payment of trade Payable,
Cash/Bank is reduced, so Current Assets = 75,000 (1,00,000-25,000)
Trade payable paid, so Current liabilities are also reduced i.e. =25,000 (50,000-25,000)
Therefore, New Current Ratio =75,000/25,000
                                           =3:1