The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson’s shortterm debt (notes payable) increase without pushing its current ratio below 2.0? What will be the firm’s quick ratio after Nelson has raised the maximum amount of short-term funds?
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