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
Answer (1)
21st Jan, 2024
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.
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