Problem: Organic Fuels has $1,312,500 in current assets and $525,000 in current liabilities. The company's initial inventory level is $375,000, and it will issue notes payable and use the proceeds to increase inventory.
1) How much can Organic Fuels' short-term debt (notes payable) increase without pushing its current ratio below 2.0?
2) What will be the firm's quick ratio after Organic Fuels has raised the maximum amount of short-term funds?