ABC Corporation's current ratio is currently 1.75 to 1. The firm's current ratio cannot fall below 1.5 to 1 without violating agreements with its bondholders. If current liabilities are presently $250 million, the maximum new short-term debt that can be issued to finance an equivalent amount of inventory expansion is:
A) $ 41.67 million.
B) $375.00 million.
C) $125.00 million.
D) $ 62.50 million.
The present current ratio is 1.75:1.
Present current liabilities are 250 million. The present ...
The solution explains how to calculate the maximum amount of short term debt that can be issued given the current ratio.