(Liquidity analysis) The Crown Carpet Company has $3,000,000 in cash and a total of $12,000,000
in current assets.
The firm's current liabilities equal $6,000,000 such that the firm's current ratio equals 2.
The company's managers want to reduce the firm's cash holdings down to $1,000,000 by paying $500,000 in cash to expand the firm's truck fleet and using $1,500,000 in cash to retire a short-term note.
If they carry this plan through, what will happen to the firm's current ratio?