What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds?

Current and Quick Ratios

The Nelson Company has $1,209,000 in current assets and $465,000 in current liabilities. Its initial inventory level is $315,000, 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? Do not round intermediate calculations. Round your answer to the nearest dollar.

What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

Nelson can raise funds upto maximum $ 275000 and use them in inventory

CA = $1209000+$ 275000 =1484000

CL = $465000+$ 275000. = 740000

Current ratio = current assets/ current liabilities

= $1484000/$ 740000

=2.00

jeff jeffy answered 1 year ago

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