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current ratio of a company is 2:1.debentures are redeemed. QN:how will it impact current ratio.DOUBT:should we consider debentures as non current liability/current liability?

Yes Shrivathsan, you are corrrect. The debentures that are to be redeemed in the current year would be treated as current liability and accordingly redemption of same would lead to reduction in Current Liabilities and Current Assets with same amount but magnitude of its effect would be greater on current assets. Accordingly, Current Ratio will improve.
 

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Debentures stated in the above case are to be considered as current liabilities because their maturity date is fixed before the issue of debentures and the company categorizes it as current maturities of long team debts under current liabilities the year before its redemption.
The current ratio will improve because the magnitude of decrease in current assets is less than that of current liabilities.
Eg. Let current assets = 2000, current liabilities = 1000. Let debentures ready to be redeemed = 500. New current ratio = (2000-500)/(1000-500) = 1500/500 = 3:1. Hence the current ratio has improved.
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thanq!
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