Answer:
The maximum amount that the company X can borrow is $ 145,000
Step-by-step explanation:
1. Let's review the information given to us to answer the question correctly:
Current ratio of assets/liabilities = 2.9
Current assets = $ 377,000
Current liabilities = Currents assets/Ratio = 377,000/2.9 = $ 130,000
2. The board of directors determines that the current ratio must never be below 2.6. What is the maximum amount that the company can borrow?
Desired ratio of assets/liabilities = 2.6
Current assets = $ 377,000
Desired liabilities = $ Current assets/Ratio = 377,000/2.6 = $ 145,000
The maximum amount that the company X can borrow is $ 145,000
