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Question

The ideal level of current ratio is _________.

A
4:2
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B
2:1
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C
Both (a) and (b)
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D
None of the above
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Solution

The correct option is D Both (a) and (b)
Ideal level of current ratio is 2:1. High ratio indicates under trading and over capitalization. Low ratio indicates over trading and under capitalization. It is most widely used of all analytical devices based on the balance sheet.

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