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 increase
B. It will remain unchanged
C. It will decrease
D. It will become 1:1
Answer: Option C
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.
Explanation:
Super profit is the excess of actual average profit over normal profit. Goodwill is Super Profit multiplied by the agreed number of years' purchase.
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