Jay Oullette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year-end balance sheet will show current assets of $12,666 and current liabilities of $7,560. 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: Calculate the firms working capital and current ratio under each situation. Assume that Bumper to Bumper had negotiated a short-term bank loan of $7,000 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. When would you recommend that the loan be taken?

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Calculate the firms working capital and current ratio under each situation. Note: Round "Current ratio" answers to 1 decimal place.

	Do Not Prepay Accounts Payable	Prepay Accounts Payable
Working capital
Current ratio

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Assume that Bumper to Bumper had negotiated a short-term bank loan of $7,000 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. Note: Round "Current ratio" answers to 1 decimal place.

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	Without Loan	With Loan
Working capital
Current ratio

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When would you recommend that the loan be taken?

The loan would be taken