The Stewart Company has $2,151,500 in current assets and $753,025 in current liabilities. Its initial inventory lev...

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Question

Answer 1

Answer #1

Ans : Current ratio = Current assets / Current liabilities

Current assets = $ 2,151,500

Current liabilities = $ 753,025

Present Current ratio = $ 2,151,500 / $ 753,025

= 2.85

let the amount of short term notes payables to be raised without lowering current ratio below 2 = x

New current ratio = 2

(current assets + x) / (current liabilities +x ) = 2

(2151500 +x) / (753025+x) = 2

2151500 + x = 1506050 + 2x

x = 645450

Maximum amount of short term notes payables to be raised without lowering current ratio below 2 = 645450

Answer 2

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