Financial and Management Accounting

1: If the current ratio stands at 2 : 1 an equal increase in current assets and current liabilities would ------- the current ratio.
A.

Decrease

B.

increase

C.

Not change

D.

Cause fluctuations in

 

Answer : A

Explanation :

 

kishor kumar said: (12:23pm on Sunday 26th June 2016)
reatio will be incereased
pooja sharma said: (12:22am on Friday 15th September 2017)
take an example...like if current assets are 400000 and current liabilities are 200000 , then current ratio will be 2:1 and now if we increase current assets and current liablities by 50000...then current assets will be 450000 and current liabilities will be 250000, then the ratio will be 1.8 : 1
Gautam Sanghpriya said: (11:12pm on Saturday 30th September 2017)
CURRENT ASSETS = 2000CURRENT LIABILITIES = 1000IF THERE IS AN INCREASE IN BOTH OF RS. 1000 IN BOTH, THEN THE AMOUNT WILL BE C.A. = 2000 1000 = 3000C.L . = 1000 1000 = 2000CURRENT RATIO = C.A./C.L. =3000/2000 = 1.5/1 or 3/2 =3:2so there is a decrease in the ratio.

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Option: A

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