(3–9)

Current and Quick Ratios The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities.

Its initial inventory level is $375,000, 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? What will be the firm’s quick ratio after Nelson has raised the maximum amount of short-term funds?