The Nelson Company has $1,960,000 in current assets and $700,000 in current liabilities. Its initial inventory
level is $490,000, and it will raise funds as additional notes payable and use them to increase inventory.
How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.3?
What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds?
1). Original Current Ratio = Current Assets / Current Liabilities = $1,960,000 / $700,000 = 2.80 So, Increase in Inventory =... View the full answer