Question : Which of the following transactions will improve the current ratio?
Option 1: Repayment of a Current Liability.
Option 2: Purchase of goods for cash.
Option 3: Purchase of goods on credit.
Option 4: Sale of goods for Rs.2,00,000 (Cost Rs. 1,50,000).
Correct Answer: Repayment of a Current Liability.
Solution : Answer = Repayment of a Current Liability.
Let, C.ratio= 2:1; C.Assets= 20,000; C.Liab. = 10,000
If Payment of C.liab = rs. 5000
New C.Assets = 20,000-5000 = 1,5000
New C. Liab = 10,000 -5,000 = 5000
New C.ratio = $\frac{15000}{ 5000}$= 3:1 (increase). Hence, the correct option is 1.
Question : Which of the following transactions will decrease the current ratio?
Question : The Gross Profit Ratio of a Company is 20%. Which of the following transactions will not change in gross profit ratio?
Question : Which of the following would increase the Quick Ratio if the quick ratio is 1.4: 1 and not change if the quick ratio is 1: 1?
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