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
Answer (1)
22nd Jan, 2024
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.
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