The current ratio is $2.5:1$. Current assets are $\text{Rs. }50,000$ and current liabilities are $\text{Rs. }20,000$. How much must be the reduction in the current assets to bring the ratio to $2:1$

1. Note Target State Conditions:We want to change the Current Ratio to $2:1$ by reducing Current Assets, while keeping Current Liabilities unchanged ($\text{Current Liabilities}=\text{Rs. }20,000$).2. Formulate New Current Assets Equation:
$$\text{Target Current Ratio}=\frac{\text{Required Current Assets}}{\text{Current Liabilities}}$$
$$\frac{2}{1}=\frac{\text{Required Current Assets}}{20,000}$$
$$\text{Required Current Assets}=2\times 20,000=\text{Rs. }40,000$$
3. Compute Necessary Asset Reduction:
$$\text{Current Value}=\text{Rs. }50,000$$
$$\text{Required Value}=\text{Rs. }40,000$$
$$\text{Reduction Amount}=50,000-40,000=\text{Rs. }10,000$$