Question

In: Finance

The Nelson Company has $1,302,000 in current assets and $465,000 in current liabilities. Its initial inventory level is $305,000

 

The Nelson Company has $1,302,000 in current assets and $465,000 in current liabilities. Its initial inventory level is $305,000, 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

Current ratio = current assets/ current liabilities

Let the increase in notes payable be x.

2 = ( $1,302,000 + x ) / ( $465,000 + x )

$930,000 + 2x = $1,302,000 + x

2x - x = $1,302,000 - $930,000

x = $372,000.

 

Quick ratio = Current assets- inventory/ Current liabilities

= ( $1,302,000 - $305,000 ) / ( $465,000 + $372,000 )

= $997,000 / $837,000

1.19.


Current ratio is $372,000.

Quick ratio is 1.19.

Related Solutions

The Nelson Company has $1,406,500 in current assets and $485,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,406,500 in current assets and $485,000 in current liabilities. Its initial inventory level is $330,000, 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?...
The Nelson Company has $1,667,500 in current assets and $575,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,667,500 in current assets and $575,000 in current liabilities. Its initial inventory level is $402,500, 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 1.3? Round your answer to the nearest cent. $   What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Round your answer to two...
The Nelson Company has $1,391,000 in current assets and $535,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,391,000 in current assets and $535,000 in current liabilities. Its initial inventory level is $410,000, 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? 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?...
The Nelson Company has $1,040,000 in current assets and $400,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,040,000 in current assets and $400,000 in current liabilities. Its initial inventory level is $200,000, 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 1.4? Round your answer to the nearest cent. 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...
The Nelson Company has $1,150,000 in current assets and $460,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,150,000 in current assets and $460,000 in current liabilities. Its initial inventory level is $300,000, 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 2.2? 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?...
The Nelson Company has $1,400,000 in current assets and $500,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,400,000 in current assets and $500,000 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 1.4? Round your answer to the nearest cent. 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...
The Nelson Company has $1,275,000 in current assets and $510,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,275,000 in current assets and $510,000 in current liabilities. Its initial inventory level is $355,000, 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? 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?...
The Nelson Company has $1,313,000 in current assets and $505,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,313,000 in current assets and $505,000 in current liabilities. Its initial inventory level is $335,000, 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 2.2? 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?...
The Nelson Company has $1,620,000 in current assets and $600,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,620,000 in current assets and $600,000 in current liabilities. Its initial inventory level is $480,000, 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 1.7? Round your answer to the nearest cent. $ What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Round your answer to two...
The Nelson Company has $1,687,500 in current assets and $675,000 in current liabilities. Its initial inventory...
The Nelson Company has $1,687,500 in current assets and $675,000 in current liabilities. Its initial inventory level is $405,000, 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 1.7? Round your answer to the nearest cent. $   What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Round your answer to two...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT