The Swiss Miss Company has several loans outstanding with a local bank. The debt agreements all contain a covenant stipulating that Swiss Miss must maintain a current ratio of at least 0.9. Eduardo "Egay" Cruz, company controller, estimates that the year-end current assets and current liabilities will be P4,200,000 and P4,800,000, respectively. These estimates provide a current ratio of only 0.875. Violation of the debt agreement will increase Swiss Miss's borrowing costs as the loans are renegotiated at higher rates. Eduardo proposes to the company president that Swiss Miss purchase inventory of P600,000 on credit before year-end. This will cause both current assets and current liabilities to increase by the same amount, but the current ratio will increase to 0.9. The extra P600,000 in inventory will be used over the later part of next year. However, the purchase will cause warehousing costs and financing costs to increase. Eduardo is concerned about the ethics of his proposal. What do you think? You are to prepare a written report discussing the following: 1. What are the relevant facts? 2. What are the ethical issues? 3. Who are the primary stakeholders? 4. What are the possible alternatives? 5. What are the practical constraints? 6. What actions should Eduardo Cruz take? 7. Which alternatives would you choose if you were in his shoes and why?