Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
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Chapter 3, Problem 9P
Summary Introduction
To calculate: The amount of short term debt and the quick ratio of the company.
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The Nelson Company has $1,430,000 in current assets and $550,000 in current liabilities. Its initial inventory level is $400,000, 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 1.8? What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Round your answer to two decimal places.
The Nelson Company has $840,000 in current assets and $400,000 in current liabilities. Its initial inventory level is $240,000, and it will raise funds as additional notes payable and use them to increase inventory.
(a) How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8?
(b) What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds?
(Liquidity analysis) Airspot Motors, Inc. has
$2,172,500
in current assets and
$869,000
in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below
2.1
(assuming all other current assets and current liabilities remain constant)?
Chapter 3 Solutions
Corporate Finance: A Focused Approach (mindtap Course List)
Ch. 3 - Prob. 1QCh. 3 - Prob. 2QCh. 3 - Over the past year, M. D. Ryngaert Co. has...Ch. 3 - Prob. 4QCh. 3 - Prob. 5QCh. 3 - Prob. 6QCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4P
Ch. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Ace Industries has current assets equal to 3...Ch. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Complete the balance sheet and sales information...Ch. 3 - The Kretovich Company had a quick ratio of 1.4, a...Ch. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 1MCCh. 3 - Prob. 2MCCh. 3 - Prob. 3MCCh. 3 - Prob. 4MCCh. 3 - Prob. 5MCCh. 3 - Prob. 6MCCh. 3 - Prob. 7MCCh. 3 - Prob. 8MCCh. 3 - Prob. 9MCCh. 3 - Prob. 10MC
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