Determine how much additional money hoffman could borrow

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Reference no: EM13928881

Hoffman Paper Company, a profitable distributor of stationery and office supplies, has an agreement with its banks that allows Hoffman to borrow money on a short- term basis to finance its inventories and accounts receivable. The agreement states that Hoffman must maintain a current ratio of 1.5 or higher and a debt ratio of 50 percent or lower. Given the following balance sheet, determine how much additional money Hoffman could borrow at this time to invest in inventory and accounts receivable without violating the terms of its borrowing agreement.

Cash	$ 50,000	Current liabilities	$ 200,000
Accounts	150,000	Long-term debt	300,000
receivable Inventory	250,000	Stockholders' equity	630,000
Fixed assets (net)	680,000	Total liabilities and
Total assets	$1,130,000	stockholders' equity	$1,130,000

Reference no: EM13928881

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