Lancer Boutique reported the following financial data for 2010 and 2009. Instructions (a) Calculate the current ratio

Question:

Lancer Boutique reported the following financial data for 2010 and 2009.

Instructions
(a) Calculate the current ratio for Lancer Boutique for 2010 and 2009.
(b) Suppose that at the end of 2010, Lancer Boutique used $1.5 million cash to pay off $1.5 million of accounts payable. How would its current ratio change?
(c) At September 30, Lancer Boutique has an undrawn operating line of credit of $12.5 million. Would this affect any assessment that you might make of Lancer Boutique€™s short-term liquidity?Explain.

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...