Ratios: Working Capital and the Current Ratio Video Lessons

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Problem: Sheffield's Furniture has $1,292,000 in current assets and $580,000 in current liabilities.  Its initial inventory level is $620,000, and it will raise funds as additional notes payable and use them to increase inventory.  How much can its short-term debt (notes payable) increase without pushing its current ratio below 1.9? a. $477,778 b. $100,000 c. $190,000 d. $211,111 e. $226,316

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Problem Details

Sheffield's Furniture has $1,292,000 in current assets and $580,000 in current liabilities.  Its initial inventory level is $620,000, and it will raise funds as additional notes payable and use them to increase inventory.  How much can its short-term debt (notes payable) increase without pushing its current ratio below 1.9?

a. $477,778

b. $100,000

c. $190,000

d. $211,111

e. $226,316

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Our tutors rated the difficulty ofSheffield's Furniture has $1,292,000 in current assets and $...as high difficulty.

What professor is this problem relevant for?

Based on our data, we think this problem is relevant for Professor Cansler's class at UCONN.