Question

Current ratio of Goodluck Paints Ltd. is 1.75 at present. In future, it wants to improve this ratio to 2. Suggest any two accounting transactions for improving the current ratio.

Answer 1

To raise the current ratio of Goodluck Paints Ltd. from 1.75 to 2, the company should either increase its current assets or decrease its current liabilities, or do both. But while doing this, it should make sure that it doesn’t harm the other side of the ratio. Therefore, the following are two accounting transactions to improve the current ratio.

1. Payment of current liabilities,
2. Issue of share capital or raising a long-term loan.