GENERAL KNOWLEDGE

Detailed explanation-1: -It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables. When the current ratio is 2:1, an equal increase in current assets and current liabilities would decrease the current ratio.

Detailed explanation-2: -Generally, a current ratio of 2:1 is considered ideal, which means that the current assets must be twice the amount of current liabilities.

Detailed explanation-3: -Now, C.A = 2 x 60000 = Rs. 120000.

Detailed explanation-4: -If a company has a high ratio (anywhere above 1) then they are capable of paying their short-term obligations. The higher the ratio, the more capable the company. On the other hand, if the company’s current ratio is below 1, this suggests that the company is not able to pay off their short-term liabilities with cash.

Detailed explanation-5: -Generally, your current ratio shows the ability of your business to generate cash to meet its short-term obligations. A decline in this ratio can be attributable to an increase in short-term debt, a decrease in current assets, or a combination of both.