SOLUTION
Let’s assume Current Assets as Rs. 2,00,000 and Current Liabilities as Rs. 1,00,000
Current Ratio = Current Assets / Current Liabilities
Current Ratio = 2,00,000 / 1,00,000
= 2: 1
(a) Cash paid to Trade Payables (say Rs. 50,000)
Current Ratio = 2,00,000 − 50,000: 1,00,000 − 50,000
= 3: 1 (Improve)
(b) Bills Payable discharged (say Rs. 50,000)
Current Ratio = 2,00,000 − 50,000 / 1,00,000 − 50,000
= 3: 1 (Improve)
(c) Bills Receivable endorsed to a creditor (say Rs. 50,000)
Current Ratio = 2,00,000 − 50,000 / 1,00,000 − 50,000
= 3: 1 (Improve)
(d) Payment of final Dividend already declared (say Rs. 50,000)
Current Ratio = 2,00,000 − 50,000 / 1,00,000 − 50,000
= 3: 1 (Improve)
(e) Purchase of Stock-in-Trade on credit (say Rs. 50,000)
Current Ratio = 2,00,000 + 50,000 / 1,00,000 + 50,000
= 1.67: 1 (Decline)
(f) Bills Receivable endorsed to a Creditor dishonoured (say Rs. 50,000)
Current Ratio = 2,00,000 + 50,000 / 1,00,000 + 50,000
= 1.67: 1 (Decline)
(g) Purchase of Stock-in-Trade for cash (say Rs. 50,000)
Current Ratio = 2,00,000 + 50,000 − 50,000 / 1,00,000
= 2: 1 (No effect)
(h) Sale of Fixed Assets (Book value of Rs. 50,000) for Rs. 45,000
Current Ratio = 2,00,000 + 45,000 / 1,00,000
= 2.45: 1 (Improve)
(i) Sale of Fixed Assets (Book value of Rs. 50,000) for Rs. 60,000
Current Ratio = 2,00,000 + 60,000 / 1,00,000
= 2.6: 1 (Improve)