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The Nelson Sheet Metal Company has current assets of $2.5 million and current liabilities of $1.0 million. The firm is in need of additional inventory
- The Nelson Sheet Metal Company has current assets of $2.5 million and current liabilities of $1.0 million. The firm is in need of additional inventory and has an opportunity to borrow money on a short-term note with which it can buy the needed material. However, a previous financing agreement prohibits the company from operating with a current ratio below 1.8. What is the maximum amount of inventory Nelson can obtain in this manner. (Hint: The note will be a current liability and the purchased inventory will be a current asset of the same size, X. Form the limiting current ratio in terms of X and solve .)
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