The Vernon Corp. has $3.1 million in current assets and $1.4 million in current liabilities. It has $600,000 in inventory. Vernon would like to borrow money in the form of notes payable to increase its inventory in preparation for an expansion into a new sales territory. How much money could it borrow before its current ratio drops below 1.8 (the lowest its bank is willing to see it go)? How much total inventory will it have it borrows that amount?

Current Ratio= Current assets/ Current liabilities

= 3,100,000 / 1,400,000

=2.214

Quick Ratio= (current assets inventories) / current liabilities