Compute the company’s current ratio

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Reference no: EM131421381

1. Before Darrington and Darling borrowed the $100,000, the company's current assets and current liabilities were $130,000 and $80,000, respectively.

a. Compute the company's current ratio if it invests $50,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the debt contract?

b. Compute the company's current ratio if it invests $80,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the debt contract?

c. Compute the company's current ratio if it invests the entire $100,000 of the borrowed funds in fixed assets. To what dollar amount can current liabilities grow before the company violates the debt contract?

Reference no: EM131421381

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