Aspero, Inc., has sales of approximately $$500,000$ per year. Aspero requires a short$-$term loan of

$$100,000$ to finance its working capital requirements. Two banks are considering Aspero$$s loan

request but each bank requires certain minimum conditions be satisfied. Bank America requires

at least a $25\%$ gross margin on sales, and Bank Boston requires a $2$:$1$ current ratio. The following

information is available for Aspero for the current year:

Sales returns and allowances are $10\%$ of sales.

Purchases returns and allowances are $2\%$ of purchases.

Sales discounts are $2\%$ of sales.

Purchase discounts are $1\%$ of purchases.

Ending inventory is $$138,000.$

Cash is $10\%$ of accounts receivable.

Credit terms to Aspero$$s customers are $45$ days.

Credit terms Aspero receives from its suppliers are $90$ days.

Purchases for the year are $$400,000.$

Ending inventory is $38\%$ greater than beginning inventory.

Accounts payable are the only current liability.

Required:

Assess whether Aspero, Inc., meets the credit constraint for a loan from either or both banks.

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