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Problem C: Liquidity Ratios ABC has P400,000 cash, P200,000 short‐term investments, P500,000 receivables, and P900,000 inventories. It has trade payables of P600,000 and short‐term loans of P900,000. It is planning to acquire another short‐term loan. However, the first loan requires ABC to maintain a minimum current ratio of 125%. Required: 1. Current ratio before additional loan* 2. Current ratio if ABC borrowed P300,000* 3. Current ratio if ABC borrows P600,000*

Problem C: Liquidity Ratios ABC has P400,000 cash, P200,000 short‐term investments, P500,000 receivables, and P900,000 inventories. It has trade payables of P600,000 and short‐term loans of P900,000. It is planning to acquire another short‐term loan. However, the first loan requires ABC to maintain a minimum current ratio of 125%. Required: 1. Current ratio before additional loan* 2. Current ratio if ABC borrowed P300,000* 3. Current ratio if ABC borrows P600,000*

FINANCIAL ACCOUNTING
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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Problem C: Liquidity Ratios
ABC has P400,000 cash, P200,000 short‐term investments, P500,000 receivables, and P900,000 inventories. It has trade payables of
P600,000 and short‐term loans of P900,000. It is planning to acquire another short‐term loan. However, the first loan requires ABC
to maintain a minimum current ratio of 125%.
Required:
1. Current ratio before additional loan*
2. Current ratio if ABC borrowed P300,000*
3. Current ratio if ABC borrows P600,000*

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