The Nelson Company has $1,428,000 in current assets and $510,000 in current liabilities. Its initial inventory level is $335,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8? Do not round intermediate calculations. Round your answer to the nearest dollar.
What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.
Current ratio = Current asset / Current Liabilities
1.8 = 1,428,000/ ( 510,000 + short term debt)
510,000 + Short term debt = 1,428,000/1.8
Short term debt = 793,333.33 - 510,000
= $ 283,333
Therefore maximum short term debt that can be raised is $283,333
= ( Current assets - Inventory)/ Current Liabilities
Total current liabilities = 510,000 + 283,333 = $793,333
= ( 1,428,000 - 335,000)/793,333
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