1. Sexy Inc. has P5 million in current assets, P3 million in current liabilities, and its initial inventory is P1 million. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company's bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants? A. P500,000 B. P1,000,000 C. P1,330,000 D. P1,660,000 E. P2,330

1. Sexy Inc. has P5 million in current assets, P3 million in current liabilities, and its initial inventory is P1 million. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company's bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants? A. P500,000 B. P1,000,000 C. P1,330,000 D. P1,660,000 E. P2,330

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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