Question

Payment of final dividend already declared what is the change in current ratio

Answer 1

Answer:

It will reduce the current ratio as cash goes out of the firm thereby decreasing the amount of current assets

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Answer 2

Answer:

It will improve the current ratio (eg:- 2:1 to 3:1)

Explanation:

For example u have declared that u will be giving out final dividend of 50,000

and u have current assets and liabilities of 2,00,000 and 1,00,000 each

Current Assets = 2,00,000 - 50,000 (Cash will decrease) = 1,50,000

Current Liabilities = 1,00,000 - 50,000 (Final dividend will decrease) = 50,000

Current Ratio = Current Assets / Current Liabilities

                      = 1,50,000 / 50,000

                      = 3:1

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