Problem: Company A 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!!
Q1. How much can Company A's short-term debt (notes payable) increase without pushing its current ratio below 2.0?
Q2. What will be the firm's quick ratio after Company A has raised the maximum amount of short-term funds?