example of favorable and unfavorable situation when the Current ratio increases from one period to the next?

Answer 1

Current ratio is Current Assets (CA) divided by Current liabilities (CL). So if the ratio increases, it means any component of CA has increased or any component of CL has decreased or both.
Examples of a favourable situation when the CR increases are when cash increased or bank overdraft decreased.
Examples of unfavourable situation when the CR increases would be if accounts receivable increased from current credit sales alone. That means the old AR has not dropped i.e. the old debtors are not paying up. You could have a bad debt situation on your hands. A similar example would be if CA increased due to inventory increases by the current inventory purchases, i.e. the old stock are not moving. You could have a stock obsolescence problem on your hands.

Answer 2

Examples Of Current Ratio