This question might be dull-witted.
There is only term in numerator: current assets. And one term in denominator: current liabilities.
An ideal current ratio is 2:1.
So how can mcqs options include 2:3:1 or 1:5:1 as choices??? And even some data given for the question has these current ratios.
What's the third term for?
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Why is the current ratio sometimes given as 1:3:1 or 1:5:1?
3y ago#1Firstly there is no 'ideal' current ratio - it depends on the nature of the business.
Secondly, there is no third term. The ratio might be 2.3: 1 (which is 2.3 to 1, and is the same as 2.3).
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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