document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1191224>Question 1191224</A>: <I><SPAN STYLE=\"word-break: break-all;\"> The current ratio of Precision Machine. Products is 3.8. If <BR>\n" );
document.write( "the firm’s current assets are $570,000, what are its current <BR>\n" );
document.write( "liabilities? To raise additional funds, what is the maximum <BR>\n" );
document.write( "amount the company can borrow on a short-term basis if <BR>\n" );
document.write( "the current ratio is to be no less than 2.6?<BR>\n" );
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document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #849229 by </B><A HREF=/tutors/aboutme.mpl?userid=CPhill><B>CPhill(1959)</B></A><img src=\"/images/stars/stars-12.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=CPhill><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=CPhill><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=849229\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> Here's how to solve this problem:\r<BR>\n" );
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document.write( "**1. Calculate Current Liabilities:**\r<BR>\n" );
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document.write( "*   Current Ratio = Current Assets / Current Liabilities<BR>\n" );
document.write( "*   3.8 = $570,000 / Current Liabilities<BR>\n" );
document.write( "*   Current Liabilities = $570,000 / 3.8<BR>\n" );
document.write( "*   Current Liabilities = $150,000\r<BR>\n" );
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document.write( "**2. Calculate the Maximum Borrowing Amount:**\r<BR>\n" );
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document.write( "*   We want the current ratio to be no less than 2.6 after borrowing. Let 'x' be the amount borrowed.<BR>\n" );
document.write( "*   New Current Assets = $570,000 + x<BR>\n" );
document.write( "*   New Current Liabilities = $150,000 + x<BR>\n" );
document.write( "*   New Current Ratio = (New Current Assets) / (New Current Liabilities)<BR>\n" );
document.write( "*   2.6 = ($570,000 + x) / ($150,000 + x)\r<BR>\n" );
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document.write( "Now, solve for x:\r<BR>\n" );
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document.write( "*   2.6 * ($150,000 + x) = $570,000 + x<BR>\n" );
document.write( "*   $390,000 + 2.6x = $570,000 + x<BR>\n" );
document.write( "*   1.6x = $180,000<BR>\n" );
document.write( "*   x = $112,500\r<BR>\n" );
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document.write( "Therefore, the maximum amount the company can borrow on a short-term basis is $112,500.<BR>\n" );
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