Mitchell corporation has current assets of $1,200,000 and current liabilities of $750,000. if they issue $100,000 of new stock what will their new current ratio be? (rounded)

The current ratio is an evaluation of current assets to current liabilities. It is calculated by dividing your current assets by your current liabilities. Future creditors use the current ratio to measure a company's capacity to pay for interim debts.

In the problem, the current assets are $1,200,000 but the company issued new stock, so add the $100,000 to the current asset because when shares are issued, it is exchanged for cash or cash equivalents.

The liability will remain the same because the issuance of stock will only affect the equity and asset.

$1300000/$750000 = 1.73:1 or the current ratio is 2:1