Pay for the inventory with short-term debt

Assignment Help Financial Management
Reference no: EM131020403

Ronaldinho Trading Co. is required by its bank to maintain a current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to acquire additional inventory to meet an unexpected surge in the demand for its products and will pay for the inventory with short-term debt. How much inventory can the firm purchase without violating its debt agreement, if their total current assets equal $3.5 million? (Round your final answer to the nearest dollar.)

Reference no: EM131020403

Questions Cloud

What is the behavioural finance challenge to hypothesis : What does the efficient market hypothesis say about a) securities b) their reaction to new information and c) investor opportunities to profit? What is the behavioural finance challenge to this hypothesis?
Merchandise returned and subsequently receives : Skycrest Co., a furniture wholesaler, sells merchandise to Boyle Co. on account, $43,200, terms 1/10, n/30. The cost of the merchandise sold is $25,900. Skycrest Co. issues a credit memo for $8,600 for merchandise returned and subsequently receives t..
Cost of the merchandise : The cost of the merchandise sold is $38,000. Sombrero Co. issues acredit memo for $13,300 for merchandise returned and subsequently receives the amount due within the discount period. The cost of the merchandise returned is $8,000.
Calculates the personal and dependent exemption amount : The Brock's spend $350 each month in support of William. This support is limited to food and utilities. William spends $850 per month on medical expenses, clothing, and tuition for a community college where he is taking classes toward a degree in ..
Pay for the inventory with short-term debt : Ronaldinho Trading Co. is required by its bank to maintain a current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to acquire additional inventory to meet an unexpected surge in the demand for its products and will pay for ..
Cash versus accrual accounting method for the business : Select two different types of HCOs and comment on the most positive and most negative effects of using the cash versus accrual accounting method for the business. Additionally, include the effect of the choices on revenue recognition and matching pri..
Primarily on developing new internet-based projects : Harry Davis is interested in establishing a new division that will focus primarily on developing new Internet-based projects. their capital structure is 10% debt and 90% common equity; their cost of debt is typically 12%; and they have a beta of 1.7...
Contra asset account for accounts receivable : At the end of the current year, A claim against the customer created by selling merchandise or services on credit.Accounts Receivable has a balance of $3,460,000; The contra asset account for accounts receivable.
Find the vertex and line of symmetry : Find the vertex,line of symmetry, and the maximum or minimum value of f(x). Graph the function.  F(x)= 5 (x+2)2+5 .

Reviews

Write a Review

Financial Management Questions & Answers

  Positive economic information for common stock investors

Various management actions provide investors with clues as to the future prospects for the firm. Which of the following actions by management contains the most positive economic information for common stock investors?

  What is the intrinsic value of this preferred stock

Big Manufacturer, Inc.’s perpetual preferred stock has an annual dividend of $7.50 per share and is selling in the market for $85.00 per share. If your required return on this preferred stock is 8.0%, what is the intrinsic value of this preferred sto..

  Weighted-average cost of capital assuming a tax rate

The total market value of Okefenokee Real Estate Company's equity is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.4 and that the expected risk premium on the market is 1..

  Land owner receives annual royalty payment

Suppose that a land owner receives annual royalty payment of $2000 at the end of first year, $2200 at the end of second year, $1900 at the end of third year, $2500 at the end of forth year, and $1500 at the end of fifth year. Calculate the future val..

  Assume the company operates at full capacity

Pumpkin Mfg., Inc., is currently operating at only 92 percent of fixed asset capacity. Current sales are $780,000. Fixed assets are $470,000 and sales are projected to grow to $880,000. How much in new fixed assets is required to support this growth ..

  Compute dsmns cost of internal equity capital

DSMN's dividend policy is to pay out 50 percent of each year's earnings as dividends. DSMN's marginal tax rate is 40 percent, and its average tax rate is 35 percent. Compute DSMN's cost of internal equity capital.

  Describe the basic strategy in riding the yield curve

Describe the basic strategy in riding the yield curve. Can you ride the yield curve if the yield curve is downward sloping with short term rates above long term rates?

  Beta of equity and beta of assets

Big Bass Sound (BBS) is a thriving music business. You would like to understand the market risk of BBS and are looking to find its Beta of the Assets. BBS' Beta of Equity is 3, the beta of debt is 0.3, and the tax rate is 32%. BBS has 169 in debt out..

  Two different salary arrangements

You have just been offered a job. You have the choice of two different salary arrangements. You can have 55,000 per year for the next two years, payable at the end of each year; or you can have 40,000 per year for the next two years, payable at the e..

  Annuity payment over four years if interest rates

What's the present value of a $870 annuity payment over four years if interest rates are 8 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

  None of the original shares have been sold or redeemed

Three years ago, an ETF was initiated with 1 million shares in 10 stocks each with a market value of $10. The total market value of the ETF was then $100 million (1 million shares * 10 stocks * $10). The ETF issued 20 million shares which originally ..

  The project will require an initial investment

The project will require an initial investment of $20,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for $9,000, after taxes, if the project is rejected. What should Garida do ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd