Dan Davis, the chief financial officer, is responsible for The Furniture Mart's cash budget for 20X6. The budget will help Davis determine the amount of long-term borrowing needed to end the year with a cash balance of $150 thousand. Davis's assistants have assembled budget data for 20X6, which the computer printed in alphabetical order. Not all the data items reproduced below are used in preparing the cash budget.

Assumed Data) (In thousands)

Actual cash balance, December 31, 20X5.................$ 140

Budgeted total assets.................................................22,977

Budgeted total current assets..................................... 7,776

Budgeted total current liabilities............................... 4,860

Budgeted total liabilities............................................11,488

Budgeted total stockholders' equity........................... 7,797

Collections from customers.......................................18,527

Dividend payments................................................... 237

Issuance of stock....................................................... 627

Net income................................................................ 1,153

Payment of long-term and short-term debt................ 950

Payment of operating expenses................................. 2,349

Purchases of inventory items.....................................14,045

Purchase of property and equipment......................... 1,518

Required

1. Prepare the cash budget of The Furniture Mart, Inc., for 20X6.

2. Compute The Furniture Mart's budgeted current ratio and debt ratio at December 31, 20X6. Based on these ratio values, and on the cash budget, would you lend $100 thousand to The Furniture Mart? Give the reason for your decision.