Question

a company 's current assets are 700000 and it's current laibilities are 400000 subsequently it paid 50000 to a trade payable the current ratio after the payment will be. (a)2:1 (b)1.75:1 (c) 2.33:1 (d)1.5:1
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Answer 1

Answer:

Current Assets = 7,00,000

Current Liabilities = 4,00,000

The Company paid trade payables of 50,000.

So, since trade payable is a current liabilities the amount of current liabilities will be decreased from 4,00,000 to 3,50,000.

since the payment was done the cash will also decrease from 7,00,000 to 6,50,000.

Current ratio = Current Assets/ Current Liabilities

= 6,50,000/3,50,000

= 1.85:1

Hope it helps