Capital Investments Corporation (CIC) requested a sizable loan from First Federal Bank to acquire a large piece of land for future expansion. CIC reported current assets of $1,900,000 (including $430,000 in cash) and current liabilities of $1,075,000. First Federal denied the loan request for a number of reasons, including the fact that the current ratio was below 2:1. When CIC was informed of the loan denial, the controller of the company immediately paid $420,000 that was owed to several trade creditors. The controller then asked First Federal to reconsider the loan application. Based on these abbreviated facts, would you recommend that First Federal approve the loan request? Why? Are the controller’s actions ethical?

  • CreatedFebruary 27, 2015
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