The current ratio is 2 : 1. Identify which of the following transactions would improve, reduce and not change the current ratio. Match the LIST-I with LIST-II
LIST-I LIST-II A. Payment of current liability I. Current ratio will reduce B. Sold goods on credit II. Current ratio will improve C. Purchased goods on credit III. No change in current ratio
Choose the correct answer from the options given below:
The current ratio is 2 : 1. Identify which of the following transactions would improve, reduce and not change the current ratio. Match the LIST-I with LIST-II
| LIST-I | LIST-II | |
|---|---|---|
| A. | Payment of current liability | I. Current ratio will reduce |
| B. | Sold goods on credit | II. Current ratio will improve |
| C. | Purchased goods on credit | III. No change in current ratio |
Choose the correct answer from the options given below:
Solution
✅ Correct Option: 4
Paying a current liability reduces both numerator and denominator equally; since the ratio exceeds , it improves (II). Selling goods on credit only converts inventory into debtors, leaving current assets unchanged (III). Buying goods on credit raises both sides equally, pulling the ratio down towards (I).
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