During 2015, The Mann Corporation borrowed \($500,000\) from The Biltmore National Bank. The loan agreement included a debt covenant restricting the company’s level of debt relative to shareholders’ equity. The covenant specified that Mann’s long-term debt to shareholders’ equity ratio could not exceed 1-to-1 at any time during the loan period. The Mann Corporation’s 2015 year-end balance sheet appeared as follows:

Calculate The Mann Corporation’s long-term debt to shareholders’ equity ratio at year-end 2015. What is the company’s maximum borrowing capability at year-end 2015 without violating the long-term debt to shareholders’
equity covenant of the existing loan agreement? What is the maximum dividend that the company can pay at year-end without violating the debt covenant? If the company pays a cash dividend of \($100,000\) at year-end 2015, what is the company’s maximum borrowing capability without violating the debt covenant?

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Total assets.. Current liabilities. Long-term debt Shareholders' equity 2015 $2,001,600 $ 542,100 625,500 834,000 $2,001,600