Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
100%
This is an example prioblem. I need help understanding the math that is being done?
Transcribed Image Text:ale (Evaluating liquidity) Aylward Inc. currently has $2,185,000 in current assets and $876,000 in current liabilities. The
a company's managers want to increase the firm's inventory, which will be financed by a short-term note with the
th bank. What level of inventories can the firm carry without its current ratio falling below 2.2?
Aylward's target current ratio is 2.2. Let X represent the cost of the additional inventory financed with the
short-term note. We solve for X as follows:
$2,185,000 + X
2.2 =
$876,000 + X
2.2x ($876,000 +X) = $2,185,000 +X
$1,927,200 + 2.2X = $2,185,000 +X
X x(2.2 - 1) = $2,185,000 – $1,927,200
$2,185,000 – $1,927,200
X= -
= $214,833
2.2 - 1
↑
↑
Transcribed Image Text:IL (Evaluating liquidity) Aylward Inc. currently has $2,185,000 in current assets and $876,000 in current liabilities. The
aç company's managers want to increase the firm's inventory, which will be financed by a short-term note with the
th bank. What level of inventories can the firm carry without its current ratio falling below 2.2?
« STEP 1: FORMULATE A SOLUTION STRATEGY
Current ratio is defined as:
current assets
Current ratio
current liabilities
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education