Miller Inc. has requested a new line of credit to address the seasonality of revenues. The request is for an $9,600,000 demand loan and resulted in your lender requiring a working capital analysis. You have been assigned the task of calculating the expected line of credit requirement based on the information provided below. The lender has suggested a covenant which limits the current ratio including any demand bank loan to no worse than a 1.8:1. Given this is a future oriented analysis - use 360 days as a year. Your task: a) Prepare a schedule of working capital that determines what the maximum loan amount is which meets a Current Ratio of 1.8:1 b) If the maximum loan was not allowed to exceed 50% of Accounts Receivable and 12.5% of Inventory determined in a) ve - is the loan request above covered with adequate security? Show calculation and decision. Assets Cash Accounts receivable Inventory Accounts payable Short term bank loan Balance = $0 (no overdraft allowed) 60 days to collect 90 days on hand (seasonal variation) 45 days to pay TO BE DETERMINED Income Statement Revenue - net 30 day selling terms Cost of sales 96,000,000 60% of revenues Key Performance Indicator Current Ratio > 1.8:1 Miller Inc. has requested a new line of credit to address the seasonality of revenues. The request is for an $9,600,000 demand loan and resulted in your lender requiring a working capital analysis. You have been assigned the task of calculating the expected line of credit requirement based on the information provided below. The lender has suggested a covenant which limits the current ratio including any demand bank loan to no worse than a 1.8:1. Given this is a future oriented analysis - use 360 days as a year. Your task: a) Prepare a schedule of working capital that determines what the maximum loan amount is which meets a Current Ratio of 1.8:1 b) If the maximum loan was not allowed to exceed 50% of Accounts Receivable and 12.5% of Inventory determined in a) ve - is the loan request above covered with adequate security? Show calculation and decision. Assets Cash Accounts receivable Inventory Accounts payable Short term bank loan Balance = $0 (no overdraft allowed) 60 days to collect 90 days on hand (seasonal variation) 45 days to pay TO BE DETERMINED Income Statement Revenue - net 30 day selling terms Cost of sales 96,000,000 60% of revenues Key Performance Indicator Current Ratio > 1.8:1