which of the following increase current ratio?Issue of debentures to buy inventorySale of long term Investments for cashAvail bank overdraft to buy MachineIssue of Debentures to buy building

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It compares a firm's current assets to its current liabilities. The formula for calculating the current ratio is:

Current Ratio = Current Assets / Current Liabilities

Let's analyze each of the options:

1. Issue of debentures to buy inventory: This will increase the current ratio. Debentures are a long-term liability, so they do not affect the denominator of the current ratio. However, buying inventory increases current assets, which increases the numerator of the current ratio.

2. Sale of long term Investments for cash: This will also increase the current ratio. Selling long-term investments increases cash, a current asset, which increases the numerator of the current ratio. The denominator remains unaffected as long-term investments are not a current liability.

3. Avail bank overdraft to buy Machine: This will decrease the current ratio. A bank overdraft is a current liability, so it increases the denominator of the current ratio. Buying a machine is a long-term investment and does not affect the numerator, which is current assets.

4. Issue of Debentures to buy building: This will not affect the current ratio. Issuing debentures increases long-term liabilities, not current liabilities, so the denominator of the current ratio is unaffected. Similarly, buying a building is a long-term investment and does not affect current assets, the numerator of the current ratio.

So, the actions that increase the current ratio are the issue of debentures to buy inventory and the sale of long-term investments for cash.