Equal increase in the short-term notes would occur

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The Needed Corp has current assets of $2.8 million and current liabilities of $1 million. The firm needs additional inventories and can obtain these inventories by financing them with short-term notes (a current liability). A bond covenant in some of their long-term debt requires the firm to have a current ratio (current asset/current liabilities) of not less than 1.9. Assuming that Needed Company reduces it current ratio to 1.9, how much additional inventories can the firm add? It should be noted that an equal increase in the short-term notes would occur.

Reference no: EM131047710

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