The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $380,000

Question

2 years ago

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The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $380,000

, 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

Business

1 answer:

Sedbober [7] · Answer 1 · 2022-08-04T10:50:58+03:00

Answer:

company can value of $190909.1

Explanation:

Given data:

current assets = $1,312,500

current liabilities = $525,000

initial inventory level is $380,000

current ratio = 2.2

current liabilities is calculated as $= \frac{Current/ Assets}{current/ ratio}$

plugging all value in above relation

current liabilities $= \frac{1312500}{2.2}$

current liabilities = $ 596590.90

and we know current liabilities is $525,000. Thus company can value of $190909.1