Question : If the liquid ratio were 1.2:1, the money obtained from debtors would affect the liquid ratio?
Option 1: Increase gross profit ratio
Option 2: Increasing liquid ratio
Option 3: Have no effect on the liquid ratio
Option 4: Decrease liquid ratio
Correct Answer: Have no effect on the liquid ratio
Solution : Cash collected from debtors would have no effect on the liquid ratio as cash received from the debtor means cash increases and the debtor decreases it means one asset increases and another is decreasing with the same amount. Hence option 3 is the correct answer.
Question : If the current ratio were 2:1, how the purchase of goods on credit will affect the current ratio?
Option 1: Decrease gross profit ratio
Option 2: Have no effect on the Current ratio
Option 3: Increase Current ratio
Option 4: Decrease the Current ratio
Question : The Current Ratio of a Company is 2:1. Redemption of Debentures would
Option 1: Increase current Ratio
Option 2: Decrease Current ratio
Option 3: Have no effect on current ratio
Option 4: Decrease gross profit ratio
Question : The Current Ratio of a Company is 2: 1. What will be the effect on the current Ratio if purchased goods on credit
Option 1: Increase
Option 2: Decrease
Option 3: No change
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