37) The Target Company has current assets of $10,000 and current liabilities of $8,000. They are concerned about their current ratio and are considering paying Accounts Payable totaling $3,000. The...

37) The Target Company has current assets of $10,000 and current liabilities of $8,000. They are concerned about their current ratio and are considering paying Accounts Payable totaling $3,000. The Target Company has a loan with National Bank which requires them to maintain a minimum current ratio of 1.4.

Required:

1.What is the formula for the current ratio?

2.Compute the current ratio before the possible payment of the liabilities of $3,000.

3.Compute the current ratio assuming that Target Company pays the $3,000 in current liabilities.

4.Compute the current ratio assuming that Target Company buys inventory of $3,000 on account. Ignore Requirement 3.

5.Compute the current ratio assuming that Target Company sells short-term investments with a carrying value of $3,000 for $3,000. Ignore Requirements 3 and 4.