Multiple choice

Directions: Choose the correct option for the given question.

Consider the following statements: Current ratio is increased by

  1. Issue of redeemable preference shares.
  2. Selling of old furniture for cash.
  3. Cash realized from debtors. Which of the statements given above are correct?

  1. (1) and (2) only

  2. (2) and (3) only

  3. (1) and (3) only

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Issuing redeemable preference shares increases cash (current asset) without affecting current liabilities, improving the ratio. Selling furniture for cash similarly increases current assets. Cash from debtors merely replaces one current asset (receivables) with another (cash), leaving the ratio unchanged.

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