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

(A) 1 : 1
(B) 2 : 1
(C) no ideal ratio
(D) 1 : 2
(E) 1 : 3

Choose the correct answer from the options given below :

(B) and (A) only

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

The ideal ratios for Current Ratio and Quick Ratio can vary depending on the industry and specific circumstances of a company.

Current Ratio: A current ratio of 2:1 is often considered a standard benchmark. This means that a company's current assets are twice its current liabilities.

Quick Ratio (also known as Acid-Test Ratio): The quick ratio is considered satisfactory if it is around 1:1.

Current Ratio = Current Assets / Current Liabilities. This ratio measures the company's ability to pay off its current liabilities with its current assets. A Current Ratio greater than 1 indicates that the company has sufficient current assets to cover its current liabilities, which is considered a healthy liquidity position. The ideal ratio is 2:1.

Liquid Ratio is the ratio of quick (or liquid) asset to current liabilities. It is expressed as
Quick ratio = Quick Assets/ Current Liabilities.
The quick assets are defined as those assets which are quickly convertible into cash. While calculating quick assets we exclude the inventories at the end and other current assets such as prepaid expenses, advance tax, etc., from the current assets. Because of exclusion of non-liquid current assets it is considered better than current ratio as a measure of liquidity position of the business. It is calculated to serve as a supplementary check on liquidity position of the business and is therefore, also known as ‘Acid-Test Ratio’.