Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 4, Problem 1SP
Summary Introduction
To determine: The level of inventories the firm can carry without reducing the current ratio to 2.0.
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Awkward Inc. currently has $2,145,000 in current assets and $858 in current liabilities. The company's managers want to increase the firm inventory, which will be financed by short-term note with the bank. What level of inventories can the firm carry without its current ratio falling below 2.0?
The Stewart Company has $1,566,500 in current assets and $595,270 in current liabilities. Its initial inventory level is $328,965, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0? Round your answer to the nearest dollar. $
The Nelson Company has $840,000 in current assets and $400,000 in current liabilities. Its initial inventory level is $240,000, and it will raise funds as additional notes payable and use them to increase inventory.
(a) How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8?
(b) What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds?
Chapter 4 Solutions
Foundations Of Finance
Ch. 4 - Describe the five-question approach to using...Ch. 4 - What are the limitations of industry average...Ch. 4 - What is the difference between a firms gross...Ch. 4 - Prob. 9RQCh. 4 - Prob. 1SPCh. 4 - Prob. 2SPCh. 4 - Prob. 3SPCh. 4 - (Price/ book) Chang, Inc.s balance sheet shows a...Ch. 4 - Prob. 5SPCh. 4 - (Ratio analysis) The balance sheet and income...
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