Practice Current Ratio (1.4.1.1) - Ratio Analysis

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10 questions

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6 questions · about 4 min · pass mark 70%. Hints available.
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4 questions · about 3 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is the formula for calculating the Current Ratio?
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Think about what each term means.
Question 2.
What is an ideal Current Ratio?
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What do we compare assets to?
3Question 3.
What does the Current Ratio indicate?
- A company's long-term debts
- A company's ability to pay short-term obligations
- The cash position of a company
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Think about what short-term obligations mean.
4Question 4.
True or False: A Current Ratio of 1:1 is considered financially healthy.
- True
- False
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Consider what the ideal ratio should be.
Question 5.
Using provided values: Current Assets = ₹360,000, Current Liabilities = ₹180,000. Calculate the Current Ratio and discuss what it indicates about the company's liquidity.
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Think about how the ratio reflects financial health against liabilities.
Question 6.
A company has a Current Ratio of 1.5 but is facing cash flow issues. Identify potential factors that could lead to this scenario.
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Consider why a company might not be able to convert assets to cash quickly.

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