Baker Corp is required by a debt agreement to maintain a current ratio

Baker Corp is required by a debt agreement to maintain a current ratio of at least 2.5, and Baker’s
current ratio now is 3.

Baker wants to purchase additional inventory for its upcoming Christmas
season, and will pay for the inventory with short-term debt. How much inventory can Baker
purchase without violating its debt agreement if their total current assets equal $15 million?
A) $4.50 million B) $1.67 million C) $0.50 million D) $6.00 million

ANSWER

B