Accountancy Part BAccounting Ratios

The ideal ratio for Current Ratio and Quick Ratio respectively are :…

The ideal ratio for Current Ratio and Quick Ratio respectively are :

(A) 1 : 1
(B) 2 : 1
(C) 3 : 1
(D) 1 : 2
(E) 1 : 3

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B) and (A) only

The answer must give the current ratio first and the quick ratio second, as the word “respectively” says. The accepted norm is 2 : 1 for the current ratio and 1 : 1 for the quick (liquid) ratio, so the order is (B), then (A).

(A) 1 : 1 — Correct. This is the norm for the quick ratio, the second ratio asked for.

(B) 2 : 1 — Correct. This is the norm for the current ratio, the first ratio asked for.

(C) 3 : 1 — Incorrect. A ratio this high is more than the norm for either ratio and points to idle current assets.

(D) 1 : 2 — Incorrect. It would mean current liabilities twice the current assets, a weak position.

(E) 1 : 3 — Incorrect. This is weaker still and is not a norm for either ratio.

NCERT (2026-27 edition):
Current Ratio – “… Normally, it is safe to have this ratio within the range of 2:1.”

NCERT (2026-27 edition):
Quick or Liquid Ratio – “… Significance: The ratio provides a measure of the capacity of the business to meet its short-term obligations without any flaw. Normally, it is advocated to be safe to have a ratio of 1:1 as unnecessarily low ratio will be very risky and a high ratio suggests unnecessarily deployment of resources in otherwise less profitable short-term investments.”