Question

A company’s Current assets are ₹ 3,00,000 and its current liabilities are ₹ 2,00,000. Subsequently, it paid ₹ 50,000 to its trade payables. Current ratio will be ______.

Options

• 2 : 1

• 1.67 : 1

• 1.25 : 1

• 1.5 : 1

Answer 1

A company’s Current assets are ₹ 3,00,000 and its current liabilities are ₹ 2,00,000. Subsequently, it paid ₹ 50,000 to its trade payables. Current ratio will be 1.67 : 1.

Initial Current Assets = ₹ 3,00,000

Initial Current Liabilities = ₹ 2,00,000

When the company pays ₹ 50,000 to its trade payables, the following changes occur:

Current Assets = 3,00,000 − 50,000

= ₹ 2,50,000

Current Liabilities = 2,00,000 − 50,000

= ₹ 1,50,000

Current Ratio = `"Current Assets"/"Current Liabilities"`

= `(2,50,000)/(1,50,000)`

= 1.67 : 1