b Assignment

Question $20,$ P$4-24($similar to$)$

HW Score: $86\mathrm{.}35\%,17\mathrm{.}27$ of $20$ points

Part $1$ of $3$

Points: $0$ of $1$

$($Liquidity analysis$)$ When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So$,$ it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts $($AAP$)$ in $2009.$ The firm had total current assets of $$1,912,863,400$ and current liabilities of $$1,366,331,000.$

a$.$ What is the firm's current ratio?

b$.$ If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below $12?$

c$.$ If the company needed to raise its current ratio to $1\mathrm{.}5$ by reducing its investment in current assets and simultaneously reducing accounts payable and short$-$term debt, how much would it have to reduce current assets to accomplish this goal?

a$.$ What is the firm's current ratio?

The firm's current ratio is $($Round to one decimal place.$)$