Question : Assertion (A): The Current Ratio is unaffected by debt redemption. Reason (R): Debentures that are redeemable within a year have an impact on the current ratio.
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: Assertion (A) is False and Reason (R) is true.
Correct Answer: Assertion (A) is False and Reason (R) is true.
Solution : Debentures that must be redeemed in the current year will be considered current liabilities, and as a result, their redemption will reduce current liabilities and current assets by the same amount, however, the impact on current assets will be greater. As a result, the current ratio will increase. Hence option 4 is the correct answer.
Question : Assertion (A): The redemption of Rs.2,000,000 in debentures will lower the ratio if the current ratio is 2:1. Reason (R): Current liabilities are debentures redeemable within a year or within the operating cycle from the date of the balance sheet. As a result, the drop
Question : Assertion (A): If working capital is 2,40,000, current assets are 4,000,00, which includes 2,000 in inventory. There will be a current ratio of 2.5:1. Reason (R): Current Ratio = Current Assets/Current Liabilities
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): 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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