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Question
Recently the M&M Company has been having problems. As a result, its financial situation has deteriorated. M&M approached the First National Bank for a badly needed loan, but the loan officer insisted that the current ratio (now 0.5) be improved to at least 0.8 before the bank would even consider granting the credit. Which of the following actions would do the most to improve the ratio in the short run?
a. Using some cash to pay off some current liabilities.
b. Collecting some of the current accounts receivable.
c. Paying off some long-term debt.
d. Selling some of the existing inventory at cost.
e. Purchasing additional inventory on credit (accounts payable).
Answer
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