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.

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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.

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 2 years ago

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