Question
Jay Oullette, CEO of Bumper to Bumper, Inc., anticipates that his company's year-end balance sheet will show current assets of $12,801 and current liabilities of
Jay Oullette, CEO of Bumper to Bumper, Inc., anticipates that his company's year-end balance sheet will show current assets of $12,801 and current liabilities of $7,570. Mr. Oullette has asked your advice concerning a possible early payment of $3,910 of accounts payable before year-end, even though payment isn't due until later. Required: a. Calculate the firm's working capital and current ratio under each situation. (Round "Current ratio" answers to 1 decimal place.) b.1 Assume that Bumper to Bumper, Inc., had negotiated a short-term bank loan of $6,000 that can be drawn down either before or after the end of the year. Calculate working capital and the current ratio at year-end under each situation, assuming that early payment of accounts payable is not made. (Round "Current ratio" answers to 1 decimal place.) b.2 When would you recommend that the loan be taken? After the end of the year Before the end of the year
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