Beacon applies for credit to the Big Wholesale Lumber Company (BWLC).

Since Beacon is a brand-new business and has no history of operations the

credit manager for the BWLC is at first reluctant to approve the request.

Eventually, after heated discussions, she agrees to a $10,000 limit, provided

that the company's ratio of Debt to Total Assets does not rise above .70, and

that its Current Ratio does not fall below 2.45.

Beacon purchases 20,000 board feet (bd. ft.) of framing lumber from BWLC

at a cost of $.90/bd. ft., (ninety cents per board foot). After reaching its credit

limit, it paid cash for the balance of the purchase.