Multiple Choice Questions on A company rsquo s Current Ratio is 2 1 After cash payment to some of its creditors Current Ratio wil........... for UPSC EPFO Exam Preparation

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Multiple Choice Questions

A company rsquo s Current Ratio is 2 1 After cash payment to some of its creditors Current Ratio wil...........

General Accounting Principles Ratio analysis 
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    A company’s Current Ratio is 2 : 1. After cash payment to some of its creditors, Current Ratio will:

    Decrease

    Incorrect Answer

    Increase

    Correct Answer

    As before

    Incorrect Answer

    None of the above

    Incorrect Answer
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    Explanation:

    If cash is paid to a creditor, it will reduce both current assets as well as current liabilities as cash is being paid and creditors are reduced.Hence ratio will Increase

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    Shreya Dhar

    If both decrease how iwll ration increase

    0 0 reply

    Ankur sharma

    To understand this assume CA = 20000, CL = 10000,hence ratio 2:1, Payment of 2000 is made to creditors. new CA = 18000, New CL=8000 new ratio will be CA/CL= 2.25 this is how you should attempt questions by taking example

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