Question

Q19.Current ratio of Vidur Pvt. Ltd. is 3:2. Accountant wants to maintain it at 2:1. Following options a
available.
(i) He can repay Bills Payable

(ii) He can purchase goods on credit

(iii) He can take short term loan

Choose the correct option:
(a) Only (i) is correct
(b) Only (ii) is correct
(c) Only (i) and (iii) are correct (d) Only (ii) and (iii) are correct​

Answer 1

Explanation:

he can purchase goods on credit to maintain current ratio is 2:1

Answer 2

a) only (i) is correct

He can repay Bills Payable

• For the following question since the accountant wants to change the current ratio from 3:2 to 2:1 then he can only repay the bills payable.

• Current ratio as known as liquidity ratio is ratio that measures firms ability to repay the short term liabilities that are to be paid under a year.
• Looking at the accounting treatment of repayment of bills payable it is referred as to decrease the liability of the firm.
• It includes the analyzing of current assets in such a way that they are maximized to repay all the debts.

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