Module: General Practice
Q108: Scenario: An SME borrower has a "Current Ratio" of 0.8:1. The bank's credit policy mandates a minimum Current Ratio of
1.33:1 (based on Tandon norms).
Question: What does this ratio indicate about the borrower's financial position?
Question: What does this ratio indicate about the borrower's financial position?
✅ Correct Answer: B
The Current Ratio is calculated as Current Assets divided by Current Liabilities.
A ratio of 0.8:1 means the firm has only ₹0.80 of current assets for every ₹1.00 of liability due soon.
This represents a Liquidity Deficit.
The Tandon Committee benchmark of 1.33:1 implies that Current Assets should be 33% higher than Current Liabilities.
A score of 0.8 is significantly below this safety threshold, indicating clear financial stress.
A ratio of 0.8:1 means the firm has only ₹0.80 of current assets for every ₹1.00 of liability due soon.
This represents a Liquidity Deficit.
The Tandon Committee benchmark of 1.33:1 implies that Current Assets should be 33% higher than Current Liabilities.
A score of 0.8 is significantly below this safety threshold, indicating clear financial stress.