The King Carpet Company has

 

$3,030,000

in cash and a total of

$11,960,000

in current assets. The firm's current liabilities equal

$6,920,000

such that the firm's current ratio equals

1.7.

The company's managers want to reduce the firm's cash holdings down to

$1,140,000

by paying

$540,000

in cash to expand the firm's truck fleet and using

$1,350,000

in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio?

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Part 1

 

What is the new current ratio?