This is an example prioblem. I need help understanding the math that is being done? ale (Evaluating liquidity) Aylward Inc. currently has $2,185,000 in current assets and $876,000 in current liabilities. Thea company's managers want to increase the firm's inventory, which will be financed by a short-term note with theth bank. What level of inventories can the firm carry without its current ratio falling below 2.2?Aylward's target current ratio is 2.2. Let X represent the cost of the additional inventory financed with theshort-term note. We solve for X as follows:$2,185,000 + X2.2 =$876,000 + X2.2x ($876,000 +X) = $2,185,000 +X$1,927,200 + 2.2X = $2,185,000 +XX x(2.2 - 1) = $2,185,000 – $1,927,200$2,185,000 – $1,927,200X= -= $214,8332.2 - 1↑↑ IL (Evaluating liquidity) Aylward Inc. currently has $2,185,000 in current assets and $876,000 in current liabilities. Theaç company's managers want to increase the firm's inventory, which will be financed by a short-term note with theth bank. What level of inventories can the firm carry without its current ratio falling below 2.2?« STEP 1: FORMULATE A SOLUTION STRATEGYCurrent ratio is defined as:current assetsCurrent ratiocurrent liabilities

The current ratio here should not fall below 2.2.So the targeted current ratio is 2.2:1. Here the…

Answered: This is an example prioblem. I need…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 8P

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