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Application Problem 12-7A a-b (Part Level Submission) (Liquidity ratios and limitations) Manitoba Manufacturing Inc. (MMI) has a loan from the Canadian National Bank to help
Application Problem 12-7A a-b (Part Level Submission) (Liquidity ratios and limitations) Manitoba Manufacturing Inc. (MMI) has a loan from the Canadian National Bank to help finance its working capital. The terms of the loan are that the bank will lend MMI an amount up to 34% of its inventory balance and 50 % of its accounts receivable. One of the loan covenants requires that MMI maintain a current ratio greater than 2. Information related to MMI's current assets and current liabilities is shown in the following table In thousands 2020 2019 Cash $115 $152 Accounts receivable 853 873 Inventory 2,120 1,546 Other current assets 234 300 Bank loan, current 394 184 Accounts payable 1,058 907 Other current liabilities 37 76 (a) Does MMI satisfy the loan covenant in both years? (Round answers to 1 decimal place, e.g. 18.4.) 2020 2019 Current ratio times times the loan covenant in 2020. MMI the loan covenant in 2019 MMI
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