Which of the following is normally treated as a satisfactory ratio of current assets to current liabilities?

1 : 1

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2 : 1

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3 : 1

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1 : 2

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Solution

The correct option is C $2 : 1$
The rule of thumb for a satisfactory current ratio is $2 : 1$ . Let Current assets be $R s . 100000$ and the Current liabilities be $R s . 40000$
Now, Current ratio = Current assets/ Current liabilities
= $100000 / 40000$
= $2.5 : 1$ .
This current ratio is satisfactory as it shows that the current assets available are $2.5$ times the amount of current liabilities.

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