eBook Problem Walk-Through

Current and Quick Ratios

The Nelson Company has $1,392,000 in current assets and $480,000 in current liabilities. Its initial inventory level is $355,000, and it will raise funds as additional notes payable and use them to increase inventory.

1. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.0? Do not round intermediate calculations. Round your answer to the nearest dollar.

$ _____

2. What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.

____