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
Option 4: Decrease gross profit ratio
Correct Answer: Decrease
Solution : Answer = Decrease
C.Ratio =2:1
We assume if the purchased goods on credit = Rs 40,000
C.A. = 2,00,000; C.liab = 1,00,0000
New Current Assets = 2,00,000+ 40,000 = 2,40,000
New Current Liab = 1,40,000
New C. Ratio = $\frac{2,40,000}{1,40,000}$= 1.71:1 (decrease) Hence, the correct option is 2.
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
Question : The Debt-Equity Ratio of a Company is 1: 2. Goods purchased on Credit would
Option 1: Increase debt to equity ratio
Option 2: Decrease debt to equity ratio
Option 4: Increase current ratio
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile