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      Question

      CC limit ₹80 cr. Audit finds ₹25 cr used for

      purchase of land. Current ratio has fallen from 1.6 to 1.1. What is the most serious inference?
      A Seasonal mismatch Correct Answer Incorrect Answer
      B Over-financing Correct Answer Incorrect Answer
      C Diversion of working capital Correct Answer Incorrect Answer
      D Accounting error Correct Answer Incorrect Answer
      E Temporary liquidity issue Correct Answer Incorrect Answer

      Solution

      Using CC for land = diversion of short-term funds.

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