A company's current ratio is 2:1. If it purchases goods on credit for ₹1,00,000, what will be the effect on the current ratio? MCQ with Answer and Explanation
A company's current ratio is 2:1. If it purchases goods on credit for ₹1,00,000, what will be the effect on the current ratio?
A. It will become 1:1
B. It will remain unchanged
C. It will increase
D. It will decrease
Answer: Option D
Solution (By JKSSB Mock Tests)
When the current ratio is greater than 1 (e.g., 2:1), an equal increase in current assets and current liabilities (like credit purchase) will result in a decrease in the ratio.
Under the Single Entry system, if additional capital introduced is Rs 20,000, Closing Capital is Rs 80,000, Opening Capital is Rs 50,000, and Drawings are Rs 15,000, what is the profit/loss?
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