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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Why is the current ratio sometimes given as 1:3:1 or 1:5:1?

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- March 14, 2023 at 8:13 pm #681312
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?

March 15, 2023 at 9:33 am #681347Firstly 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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