Question

The Current Ratio of Sana Ltd. is 2 : 1. Which of the following transactions will reduce the Current Ratio?

पर्याय

• Payment to Trade Payables

• Sale of Inventory at profit

• Sale of Inventory at Loss

• Cash collected from Trade Receivables

Answer 1

Sale of Inventory at Loss

Explanation:

When inventory is sold at a loss, the cash received is less than the value of the stock reduced. This causes a net decrease in Current Assets while Current Liabilities remain the same, which automatically reduces the Current Ratio.