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The Nelson Company has $1,687,500 in current assets and $675,000 in current liabilities. Its initial inventory...

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Finance

The Nelson Company has $1,687,500 in current assets and $675,000in current liabilities. Its initial inventory level is $405,000,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) increasewithout pushing its current ratio below 1.7? Round your answer tothe nearest cent.

    $  


  3. What will be the firm's quick ratio after Nelson has raised themaximum amount of short-term funds? Round your answer to twodecimal places.

Answer & Explanation Solved by verified expert
3.8 Ratings (660 Votes)
Answer to Part 1 Before financing Current Assets 1687500 Current Liabilities 675000 After financing Let the amount raised through ShortTerm Notes Payable be x    See Answer
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Transcribed Image Text

The Nelson Company has $1,687,500 in current assets and $675,000in current liabilities. Its initial inventory level is $405,000,and it will raise funds as additional notes payable and use them toincrease inventory.How much can Nelson's short-term debt (notes payable) increasewithout pushing its current ratio below 1.7? Round your answer tothe nearest cent.$  What will be the firm's quick ratio after Nelson has raised themaximum amount of short-term funds? Round your answer to twodecimal places.

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