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Question

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?

Top Answer

1). Original Current Ratio = Current Assets / Current Liabilities = $1,960,000 / $700,000 = 2.80 So, Increase in Inventory =... View the full answer

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Short-term debt (notes payable) increase without pushing its current... View the full answer

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