Current and Quick Ratios The Nelson Company has $1,392,000 in current assets and $480,000 in current liabilities....

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Finance

Current and Quick Ratios
The Nelson Company has $1,392,000 in current assets and $480,000in current liabilities. Its initial inventory level is $355,000,and it will raise funds as additional notes payable and use them toincrease inventory.
1. How much can Nelson's short-term debt (notes payable)increase without pushing its current ratio below 2.2? Do not roundintermediate calculations. Round your answer to the nearestdollar.
2. What will be the firm's quick ratio after Nelson has raisedthe maximum amount of short-term funds? Do not round intermediatecalculations. Round your answer to two decimal places.

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3.6 Ratings (490 Votes)

1 Lets assume the amount of shortterm debt and inventory increase is x new current ratio after increase in shortterm debt and inventory cant be below 22 Current ratio Current assetscurrent See Answer

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