The Current Ratio of a Company is 2:1. State whether the current ratio
(i) improve
(ii) reduce
(iii) not alter
from the transactions given below.
Repayment of a Current Liability.
Answer & explanation
Correct answer: option 1
Repayment of a Current Liability:
Suppose, the current liability amounts to 2,00,000 and the current asset ₹100000. And current liability of ₹50000 is repaid.
*So, after ₹50,000 is repaid,
the revised current ratio will be :
Current asset= 2,00,000-50,000 (Cash)= ₹150000
Current liability= 1,00,000-50,000 (Liability)= ₹50000
Current Ratio = 150000/50000
= 3:1