Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they pay $250,000 of their accounts payable what will their new current ratio be?
A) 3.1:1
B) 2.4:1
C) 3.6:1
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 $250,000 of accounts payable, current assets become $1,800,000 - $250,000 = $1,550,000, and current liabilities become $750,000 - $250,000 = $500,000. The new current ratio is $1,550,000 / $500,000 = 3.1:1.

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