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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


Team Careers360 3rd Jan, 2024
Answer (1)
Team Careers360 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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