The current ratio is 2.5 : 1. Current assets are Rs. 50,000 and current liabilities are Rs. 20,000. How much must be the decline in the current assets to bring the ratio to 2 : 1

Explanation

Current liabilities = Rs. 20,000
For a ratio of 2 : 1, the current assets must be `2xx20,000`
= Rs. 40,000 Present level of current assets = Rs. 50,000
Necessary decline = Rs. 50,000 – Rs. 40,000
= Rs. 10,000