Nuclear Indentures, a firm specializing in providing debt financing to high-tech firms, provided the following information concerning restrictive covenants in its notes to the financial statements:

All long-term obligations contain restrictive covenants including, among others, a requirement to maintain minimum working capital of $17,000,000, consolidated net worth . . . of not less than $25,000,000 and current assets greater than 200% of current liabilities.

The following amounts appear on the year-end balance sheet (millions of dollars):

Current assets $41.3 Total assets $65.1 Current liabilities $ 8.2 Total liabilities $22.0 Required

a. Is Nuclear Indentures in compliance with its restrictive covenants?

b. By how much might the firm’s current assets decrease and still not violate the working capital restriction? (Assume current liabilities remain constant.)

c. By how much might the firm’s current assets decrease and still not violate the current ratio constraint? (Assume current liabilities remain constant.)

d. Why might a firm’s borrowing agreements restrict both the dollar amount of working capital and the current ratio?