The Stewart Company has $2,421,000 in current assets and $1,041,030 in current liabilities. Its initial inventory level is $605,250, 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 cent.
Current ratio = Current Assets / Current Liabilities
Let X be the Addition short tern loan that is used for Inventory.
2 = [ 2421000 + X ] / [ 1041030 + X]
2421000 + X = 2082060 +2X
2X - X = 2421000 - 2082060
X = 338940
Short term Debt can be borrowed for Inventory is $ 338,940
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