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Roberts Technology Corp. is preparing its 2022 financial statements and is concerned about violating the debt covenant on a large loan. The debt covenant
Roberts Technology Corp. is preparing its 2022 financial statements and is concerned about violating the debt covenant on a large loan. The debt covenant requires Roberts to maintain a current ratio of 2.2:1. On December 13th, 2022, Roberts currently has a current ratio of 2.0.1. Roberts is considering various options to make the problem disappear. Show what impact each of the following would have on the current ratio, and whether it could achieve the goal. (Show your work). a. Pay some current liabilities off. b. Buy more inventory with cash. c. Sell off some short-term marketable securities. d. Borrow cash on a 2-year note. I e. Try to sell lots more merchandise at yearend by offering steep discounts. f. Sell unused equipment, if possible.
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