GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Identify the item that is not taken into account in computing the current ratio
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Cash
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Bank
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Land
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Bills recoverable
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Explanation:
Detailed explanation-1: -Furniture is a fixed asset and it is not included in current assets. Hence while calculating the current ratio furniture is not taken into account.
Detailed explanation-2: -The current ratio is calculated simply by dividing current assets by current liabilities. The resulting number is the number of times the company could pay its current obligations with its current assets.
Detailed explanation-3: -Issue of Debentures to buy Stock. This affects only equity and long term liabilities so doesn’t have any impact on current ratio.
There is 1 question to complete.