Question

Vibgyor Ltd. has current assets worth Rs. 3,50,000 and it needs to pay off its obligations worth Rs.2,00,000. If the firm has to make a payment of a current liability worth Rs. 50,000, what will be the current ratio:

(a) 3:1

(b) 0.75:1

(c) 1:1

(d) 2:1

Answer 1

Correct answer is (d) 2:1

Explanation: If Vibgyor Ltd. has to make a payment of a current liability worth Rs. 50,000, its current liabilities will reduce to Rs. 1,50,000.

Therefore, the current ratio after the payment will be:

Current ratio = (3,50,000 - 50,000) / 1,50,000 = 2:1