f The Carlson Company has $2,625,000 in current assets and $1,050,000 in current
ID: 2718448 • Letter: F
Question
f
The Carlson Company has $2,625,000 in current assets and $1,050,000 in current liabilities. Its initial inventory level is $750,000, and it will raise funds as additional notes payable and use them to increase inventory.
How much can Carlson’s short-term debt (notes payable) increase without pushing its current ratio below 2.0?
615,000
585,000
700,000
525,000
None of the above.
Consider the above. What will be the firm’s quick ratio after Carlson has raised the maximum amount of short-term funds?
1.26
1.06
1.15
1.12
None of the above.
The Carlson Company has $2,625,000 in current assets and $1,050,000 in current liabilities. Its initial inventory level is $750,000, and it will raise funds as additional notes payable and use them to increase inventory.
How much can Carlson’s short-term debt (notes payable) increase without pushing its current ratio below 2.0?
615,000
585,000
700,000
525,000
None of the above.
Consider the above. What will be the firm’s quick ratio after Carlson has raised the maximum amount of short-term funds?
1.26
1.06
1.15
1.12
None of the above.
Explanation / Answer
525,000 Current Assets 2,625,000.00 Current Liabilities 1,050,000.00 Let The money raised from STD be x 2 = (2625000 + x)/(1050000+x) 2100,000+2x = 2625000 + x x = 525,000 Carlson’s short-term debt (notes payable)can increase by 525,000 without pushing its current ratio below 2.0 None of the above. Quick Ratio = Quick Assets/CL Quick Ratio = (CA-Inventory)/CL Quick Ratio = (2625000 - 750000)/(1050000 + 525000) Quick Ratio = 1875000/1575000 Quick Ratio = 1.19 None of the above.
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