Based on the short-term debt that Nelson raises, the firm's quick ratio will be 1.204.
<h3>What is the firm's quick ratio?</h3><h3 />
First, find the maximum amount of short-term funds that Nelson can raise?
Assuming this amount is x, we can find it with the current ratio formula:
Current ratio = Current assets / Current liabilities
2 = (1,260,000 + x) / ( 450,000 + x)
x = $360,000
The quick ratio would therefore be:
= ( New Current assets - New inventory) / New current liabilities
= ( (1,260,000 + 360,000) - (285,000 + 360,000) ) / (450,000 + 360,000)
= 1.204
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