Answer: The new current ratio is 2.125.
Explanation: The current ratio is expressed as current assets divided by current liabilities. If the company pays $100,000 due to creditors, it means the current liabilities would reduce to $800,000 ($900,000 minus $100,000). Therefore, the new current ratio will be $1,700,000 divided by $800,000 to give 2.125.
The ratio is one of the types of liquidity ratios. It is usually used to know by what extent the company can maximize the use of its current assets to settle obligations falling due within a year.
The result therefore means the company has twice the buffer to settle its obligations falling due within a year, even after paying $100,000 to its creditors.