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QUESTION

The Speirs Company has $1,750,000 in current assets and $700,000 in current liabilities.

The Speirs Company has $1,750,000 in current assets and $700,000 in current liabilities. Its initial inventory level is $500,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Speirs's short-term debt (notes payable) increase inventory without violating a current ratio of 2 to 1? What will be the firm's quick ratio after Speirs has raised the maximum amount of short-term funds.

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