There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  Redemption of Debentures does not affect the Current Ratio of the company in any case.
Reason (R): Redemption of Debentures affects the Current Ratio because Debentures that are redeemable within 12 months or within the period of the Operating Cycle from the date of Balance Sheet are shown as Current Liabilities. Redemption of such Debentures reduces Current Liabilities.

Assertion (A) is not correct but the Reason (R) is correct

The correct answer is option 3- Assertion (A) is not correct but the Reason (R) is correct.

Assertion (A):  Redemption of Debentures does not affect the Current Ratio of the company in any case. THIS IS FALSE.

Reason (R): Redemption of Debentures affects the Current Ratio because Debentures that are redeemable within 12 months or within the period of the Operating Cycle from the date of Balance Sheet are shown as Current Liabilities. Redemption of such Debentures reduces Current Liabilities. THIS IS TRUE.

Redemption of debentures refers to the repayment of these debentures by the company to the debenture holders. So the company will discharge its liability and remove it from the balance sheet. This is a major transaction for the company since the amount of money involved tends to be quite significant. Debentures that are redeemable within 12 months or within the period of the Operating Cycle from the date of Balance Sheet are shown as Current Liabilities. Redemption of such Debentures reduces Current Liabilities.