RetailChain India operates 500 supermarkets and faces a 2% daily cash leakage due to internal shrinkage and counterfeit currency. Store managers deposit cash daily, but central account realization takes 48 hours, requiring a 50 Crore INR working capital buffer. The company implements 'Intelligent Cash Vaults' at every store, which automatically count cash, detect fakes, provide instant credit to the central account, and create a digital audit trail. Determine how this CMS intervention impacts the firm's Current Ratio and Audit Quality.

Question

Accepted Answer

The current ratio will remain the same as both are current assets, but audit quality will significantly improve due to real-time tracking and counterfeit prevention.

Answer

Both the current ratio and audit quality will deteriorate because the company is now overly dependent on the bank's technology.

Answer

The current ratio will improve as 'Cash in Hand' is converted into 'Cash at Bank' faster, and audit quality will improve due to the digital trail.

Answer

The current ratio will decrease because physical cash is replaced by bank balances, and audit quality will decrease due to the lack of paper slips.

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