Company A has current assets of 75,000 and current liabilities of $40,000. The company decides to issues stock and receives cash of $70,000. After this transaction, the company's current ratio will be:

Question

Quizplus · Accepted Answer

Current Ratio = Current Assets / Current Liabilities

Before stock issue: 
Current Ratio = $75,000 / $40,000 = 1.875

After stock issue: 
Current Assets = $75,000 + $70,000 = $145,000 
Current Liabilities = $40,000

Current Ratio = $145,000 / $40,000 = 3.625

Therefore, the current ratio after the stock issue is 3.62.

Company a Has Current Assets of 75,000 and Current Liabilities