Expert Answers

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.34 percent, the 30-year Treasury bond rate is 7.33 percent, and the inflation rate is 2.78 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate

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. At present the firm has a current ratio of 2.5 and current assets of $2.5 million. If Mitchem expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached?