Question : Assertion (A): Current Ratio is calculated by dividing liquid assets by current liabilities and current assets include loose tools, stores, and spares, and provision for doubtful debts. Reason (R): The formula for the Current Ratio is Current Assets/Current Liabilities. Loose Tools, Stores and Spares, and Provision for Doubtful Debts are included in Current Assets.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Both Assertions (A) and Reason (R) are False
Correct Answer: Both Assertions (A) and Reason (R) are False
Solution : Current Assets/Current Liabilities is the formula for the current ratio. Loose tools, stores, spare parts, and provision for doubtful debts are not considered current assets. Hence option 4 is the correct answer.
Question : Assertion (A): Current Assets/Current Liabilities is the formula for calculating the current ratio Reason (R): The current ratio is derived by dividing current assets by current liabilities. Current assets are made up of spare parts, loose tools, and stores.
Question : Assertion (A): Current Ratio = Current Assets- Stock /Current Liabilities Reason (R): If current Assets are 5,25,000, including inventory of 2,00,000 (including Loose Tools 75,000) and working capital is 2,25,000, Current Ratio will be 1.5 : 1
Question : Assertion (A): If current Assets are 5,25,000, including inventory of 2,00,000 (including Loose Tools 75,000) and working capital is 2,25,000, Current Ratio will be 1.83 : 1 Reason (R): Current Ratio = Current Assets/Current Liabilities
Question : Assertion (A): The ratio that results from dividing current assets by current liabilities is known as the liquid ratio. Reason (R): Liquid Assets/Current Liabilities is the formula for calculating the liquid ratio.
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