Compute the amount the company can borrow

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Question - A company has a revolving line of credit with an asset-based lender for a maximum amount of $10 million. The agreement calls for an "advance rate" of 75% of eligible receivables and 50% of eligible inventory.

The agreement provides that eligible receivables consist of balances that are not over 60 days old and that eligible inventories consists only of finished goods.

The accounts receivable at the end of the period is $7.5 million with $500,000 over 90 days old.

Inventory is $8 million of which $6 million is finished goods.

Compute the amount the company can borrow at this time on the revolving credit line to the nearest dollar.

Reference no: EM132983225

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