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When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio
When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced AutopartsAAP in The firm had total current assets of $ comma comma comma $ and current liabilities of $ comma comma comma $
aWhat is the firm's current ratio?
bIf the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below
cIf the company needed to raise its current ratio to by reducing its investment in current assets and simultaneously reducing accounts payable and shortterm debt, how much would it have to reduce current assets to accomplish this goal?
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