Answer:
$262,500
Explanation:
Current ratio = Current asset/Current liabilities
In line with the current ratio formula, to calculate the amount of short term debt increase, with the amount of current assets and current liabilities, we must add an amount such that the result 2.0
(1,312,500 + x) / (525,000 + x) = 2.0
Cross multiply
(1,312,500 + x) = 2.0 × (525,000 + x)
Open the brackets
1,312,500 + x = 1,050,000 + 2x
Collect like terms
1,312,500 - 1,050,000 = 2x - x
262,500 = x
It therefore means that the maximum that should be borrowed to buy inventory is $262,500
