Explanation:

- Current Ratio (CR): This measures a company's liquidity, calculated as Current Assets divided by Current Liabilities.

- Initial CR: 2:1, meaning twice as many Current Assets as Current Liabilities.

- Cash Payment to Creditors: This reduces both Current Assets (cash) and Current Liabilities (creditors).

- Impact on CR:

- Both assets and liabilities decrease equally if the same amount is paid.

- CR increases if the proportion of asset reduction is less impactful than that of liabilities because liabilities decrease in comparison to the remaining assets.

Option 2: Increase