CALCULATING LIMITS (HINT: Second worksheet of the 'Financial Audit Form' contains formulas to calculate the 'Limits' of a company. You have calculated or noted most of the ratios and numbers needed on the first worksheet) LIMITS Ratio: Amount debt can be increased based on equity: (Company's SE Industry D/E) - (Company's D) Amount debt can be increased based on assets: (Company's TA Industry D/A) - (Company's D) Improved operations based on A/R Days: ((Company's A/R days Industry A/R Days) /(Company's A/R days)) (Company's A/R*) Improved operations based on inventory days: ((Company's inventory days - Industry Inventory days)/(Company's inventory days))*(**Company's inventory) What does it mean? *Company's A/R (a.k.a. receivables (ST)) can be found in the balance sheet. **Company's Inventory can be found on the balance sheet.