The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise fundsas additional notes payable and use them to increase inventory. How muchcan Nelson’s short-term debt (notes payable) increase without pushing itscurrent ratio below 2.0? What will be the firm’s quick ratio after Nelson hasraised the maximum amount of short-term funds?
The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise fundsas additional notes payable and use them to increase inventory. How muchcan Nelson’s short-term debt (notes payable) increase without pushing itscurrent ratio below 2.0? What will be the firm’s quick ratio after Nelson hasraised the maximum amount of short-term funds?
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 8P
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The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, 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 2.0? What will be the firm’s quick ratio after Nelson has
raised the maximum amount of short-term funds?
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