Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):

Assertion (A): A low current ratio indicates the favourable position.

Reason (R): A low current ratio means low liquidity.

In the context of the above two statements, which of the following is correct?

[0.88 marks]

Both (A) and (R) are correct and (R) is the correct reason for (A).

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Both (A) and (R) are correct but (R) is not the correct reason for (A).

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Only (A) is correct.

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Only (R) is correct.

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Solution

The correct option is D Only (R) is correct.
A low current ratio indicates higher risk of liquidity in an organisation and therefore, is an unfavourable situation for a business.

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The correct option is D Only (R) is correct.A low current ratio indicates higher risk of liquidity in an organisation and therefore, is an unfavourable situation for a business.

The correct option is D Only (R) is correct.
A low current ratio indicates higher risk of liquidity in an organisation and therefore, is an unfavourable situation for a business.