Question
Blossom Manufacturing Inc. (BMI) has a loan from the Canadian National Bank to help finance its working capital. The terms of the loan are that
Blossom Manufacturing Inc. (BMI) 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 BMI an amount up to 34% of its inventory balance and 50% of its accounts receivable. One of the loan covenants requires that BMI maintain a current ratio greater than 2.0. Information related to BMIs current assets and current liabilities is shown in the following table: In thousands 2024 2023 Cash $112 $166 Accounts receivable 809 854 Inventory 2,022 1,723 Other current assets 248 270 Bank loan, current 424 195 Accounts payable 1,082 896 Other current liabilities 37 79 (a) Does BMI satisfy the loan covenant in both years? (Round answers to 1 decimal place, e.g. 18.4.) 2024 2023 Current ratio enter a number of times rounded to 1 decimal place times enter a number of times rounded to 1 decimal place times BMI select an option the loan covenant in 2024. BMI select an option the loan covenant in 2023. (b) The parts of this question must be completed in order. This part will be available when you complete the part above.
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