The Mitchem Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. The firm has a current ratio of 2.5 with current assets of $2.5 million. If Mitchem expands its receivables and and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ration standard is reached?
Current ration is defined by the book as current ration indicates a firm's liquidity, as measured by its liquid assets (current assets) relative to its liquid debt (short-term or current liabilities).
So a current ration is:
current ration = current liabilities
I don't have any clue! Please help.