Question

Sheffield's Furniture has $1,700,000 in current assets and $660,000 in current liabilities. Its initial inventory level...

Sheffield's Furniture has $1,700,000 in current assets and $660,000 in current liabilities. Its initial inventory level is $970,000, 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 2.5?

a.

$50,000

b.

$20,000

c.

$613,333

d.

$33,333

e.

$368,000

Homework Answers

Answer #1

✓ d) $ 33333

Short term debt can be increased $ 33333 without pushing it's current ratio below 2.5

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