B.J. Industries has a current ratio of 2.5, with $2.5 million in current assets. Due to sales growth, the company wants to expand accounts receivable and inventories by taking on additional short-term debt. If B.J. Industries wants to maintain a minimum current ratio of 2.0, what is the maximum additional short-term funding it can borrow?© BrainMass Inc. brainmass.com June 4, 2020, 2:32 am ad1c9bdddf
Current Ratio = 2.5
CA = 2,500,000
Using Current ratio formula, we have:
2.5 = 2,500,000/Current Liabilities(CL)
CL = 2,500,000/2.5 = ...
The solution computes additional Short-Term funding the company can borrow using AFN equation.