We appreciate your visit to The Stewart Company has 1 913 000 in current assets and 765 200 in current liabilities Its initial inventory level is 516 510 and it. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
Final answer:
The Stewart Company can increase its short-term debt (notes payable) by $191,300 without pushing its current ratio below 2.0.
Explanation:
To determine how much the Stewart Company's short-term debt (notes payable) can increase without pushing its current ratio below 2.0, we need to calculate the allowable increase in current liabilities that would still maintain the current ratio at that level. The current ratio is calculated by dividing current assets by current liabilities.
The initial current ratio is $current assets ($1,913,000) / current liabilities ($765,200) = 2.5
To maintain a current ratio of 2.0, the company's current assets must be twice the amount of its current liabilities. Given the initial inventory level and the desire to increase inventory using additional notes payable:
$1,913,000 (current assets) = 2 * (current liabilities + additional notes payable)
Simplifying, we get:
$1,913,000 = 2 * $765,200 + 2 * additional notes payable $1,913,000
= $1,530,400 + 2 * additional notes payable
additional notes payable = ($1,913,000 - $1,530,400) / 2 additional notes payable = $382,600 / 2 additional notes payable = $191,300
Therefore, the Stewart Company can increase its notes payable by $191,300 without its current ratio falling below 2.0.
Thanks for taking the time to read The Stewart Company has 1 913 000 in current assets and 765 200 in current liabilities Its initial inventory level is 516 510 and it. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!
- Why do Businesses Exist Why does Starbucks Exist What Service does Starbucks Provide Really what is their product.
- The pattern of numbers below is an arithmetic sequence tex 14 24 34 44 54 ldots tex Which statement describes the recursive function used to..
- Morgan felt the need to streamline Edison Electric What changes did Morgan make.
Rewritten by : Barada
