Question

Suppose a company starts with $8,000 in current assets and $4,000 in current liabilities. The company...

Suppose a company starts with $8,000 in current assets and $4,000 in current liabilities. The company then refinances $400 of long-term debt with short term debt. After the refinancing, what is the company's current ratio?

Round your answer to 2 decimal places, for example 1.12.

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Answer #1
Case 1 before refinancing
Current asset $8,000
Current liablities $4,000
Current ratio= Current asset/Current liblities 2.00

current ratio before re financing = 2.00

Case 2 After Refinancing
Current asset $8,000
Current liablities $4,400
Current ratio= Currunt asset/currunt liblities 1.82

when we refinances $400 of long-term debt with short term debt, the current liablities increases by $400

current ratio after re financing = 1.82

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