Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000.If they pay $350,000 of their accounts payable, what will their new current ratio be?
A)3.6:1
B)2.4:1
C)4.5:1
D)2.0:1

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Initially, the current ratio is $1,800,000 / $750,000 = 2.4:1. After paying $350,000, current assets become $1,800,000 - $350,000 = $1,450,000, and current liabilities become $750,000 - $350,000 = $400,000. The new current ratio is $1,450,000 / $400,000 = 3.625:1, which rounds to 3.6:1.

Kingery Corporation Has Current Assets of $1,800,000 and Current Liabilities