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Question
What will be the impact of ‘Cash Collected from Debtors’ on a liquid ratio of 1:1? State with reason.
Very Short Answer
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Solution
When cash is collected from debtors and the liquid ratio is 1:1, there is no change. This is because the transaction only converts one liquid asset (debtors) into another (cash), leaving total liquid assets and current liabilities unaffected.
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