Jay Oullette, CEO of Bumper to Bumper, Inc., anticipates that his company's year-end balance sheet will show current assets of $12,666 and current liabilities of $7,580. Mr. Oullette has asked your advice concerning a possible early payment of $3,870 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.)

	do not prepay accounts payable	prepay accounts payable
working capital
current ratio

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

	without loan	with loan
working capital
current ratio

b.2 When would you recommend that the loan be taken?

	After the end of the year
	Before the end of the year