Dolly Harding owns and operates Dolly Jo's Café. Dolly has requested a credit application from LRM, Inc.,

Question:

Dolly Harding owns and operates Dolly Jo's Café. Dolly has requested a credit application from LRM, Inc., a major food supplier from which she hopes to begin purchasing inventory. LRM, Inc., has requested that Dolly submit a full set of for Dolly Jo's Café with the credit application. Dolly is concerned because the most recent for Dolly Jo's Café reflects a current ratio of 1.24. Dolly has heard that most creditors like to see a current ratio that is 1.5 or higher. In order to increase Dolly Jo's Café's current ratio, Dolly has convinced her parents to loan the business $25,000 on an 18-month long-term note payable. Dolly's parents are apprehensive about having their money "tied up" for over a year. Dolly reassured them that even though the note is an 18-month note, Dolly Jo's Café can, and probably will, repay the $25,000 sooner.
Requirements
1. Discuss the ethical issues related to the loan from Dolly's parents.
2. Why do you think creditors like to see current ratios of 1.5 or higher?
Financial Statements
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