NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
A company's current ratio is 2.0 with current liabilities of Rs 50 crore. It uses Rs 10 crore of cash to repay a short-term loan. The new current ratio will be:
The current ratio becomes 2.25. Current assets of Rs 100 crore fall to Rs 90 crore and current liabilities of Rs 50 crore fall to Rs 40 crore after the repayment. Removing equal amounts from both sides raises a ratio that is above one.
- A2.00
- B2.25Correct
- C1.80
- D2.50
Explanation
Current assets = 2.0 x 50 = 100 crore. After repaying 10 crore of cash against the loan, assets are 90 and liabilities are 40. The new ratio = 90/40 = 2.25. A ratio above 1 rises when equal amounts are removed from both sides.
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