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Current Ratio: `"Current Assets"/"Current Liabilities"`
Current Assets = Current Investments + Inventories (excluding Loose Tools and Spare Parts) + Trade Receivables + Cash and Bank Balance + Short-term Loans and Advances + Other Current Assets
Current Liabilities = Short term borrowings + Trade payables + Other Current Liabilities + Short term Provisions.
Quick Ratio / Liquid Ratio : `"Quick Assets"/"Current Liabilities"`
`"All Current Assets- Inventories(excluding Loose Tools and Spare Parts)- Prepaid Expenses"/"Current Liabilities"`
`"Liquid Assets"/"Current Liabilities"`
The current ratio of X. Ltd is 2:1. State with reason which of the following transaction would
i. Increase or ii. decrease or iii. not change the ratio
1. Included in the trade payables was a bills payable of Rs.9,000 which was met on maturity.
2. Company issued 1,00,000 equity shares of Rs.10 each to the Vendors of machinery purchased.