Current items of equal size on the balance sheet

Reference no: EM131007656

The Nelson Sheetmetal Company has current assets of $2.5 million and current liabilities of $1.0 million. The firm is in need of additional inventory and has an opportunity to borrow money on a short-term note with which it can buy the needed material. However, a previous financing agreement prohibits the company from operating with a current ratio below 1.8. What is the maximum amount of inventory Nelson can obtain in this manner? (Hint: The note and the inventory are both current items of equal size on the balance sheet.)

Reference no: EM131007656

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