Question
A company has a Current Ratio of 3:1. If it pays a
current liability of ₹50,000, what will be the effect on the Current Ratio?Solution
Let's assume Current Assets (CA) = 3,00,000 and Current Liabilities (CL) = 1,00,000. Current Ratio = 3:1. After paying ₹50,000, CA become ₹2,50,000 and CL become ₹50,000. New Ratio = 2,50,000 / 50,000 = 5:1. Thus, the ratio increases.
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