Jay Oullette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year-end balance sheet will show current assets of $12,774 and current liabilities of $7,620. Oullette has asked your advice concerning a possible early payment of $3,830 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?

\begin{tabular}{|l|c|c|} \hline & DoNotPrepayAccountsPayable & PrepayAccountsPayable \\ \hline Working capital & & \\ \hline Current ratio & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Without Loan & With Loan \\ \hline Working capital & & \\ \hline Current ratio & & \\ \hline \end{tabular} When would you recommend that the loan be taken