Working capital management

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Reference no: EM1314845

The question is regarding working capital management involving computation of inventory needed.

ABC Corp. is required by a debt agreement to maintain a current ratio of at least 1.5, and ABC's current ratio now is 2.0. ABC wants to purchase additional inventory for its upcoming Christmas season, and will pay for the inventory with short-term debt. How much inventory can ABC purchase without violating its debt agreement if their total current assets equal $20 million?

a. $25.00 million
b. $10.00 million
c. $13.33 million
d. $6.67 million

Reference no: EM1314845

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