Multiple choice

Directions: Choose the correct option for the given question.

Which of the following transactions changes the current ratio?

  1. Purchase of goods for cash

  2. Plant acquired on account

  3. Sold goods on credit

  4. Debentures converted into equity capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Purchasing goods for cash merely converts one current asset to another. Selling goods on credit replaces cash with receivables. Converting debentures to equity affects non-current items. However, acquiring plant on account increases current liabilities without changing current assets, reducing the current ratio.

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