Jay Ouellette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year$-$end balance sheet will show current assets of $$12,693$ and current liabilities of $$7,440.$ Ouellette has asked your advice concerning a possible early payment of $$3,890$ of accounts payable before year$-$end, even though payment isn't due until later.

Required:

Calculate the firm$$s working capital and current ratio under each situation.

Assume that Bumper to Bumper had negotiated a short$-$term bank loan of $$7,000$ that can be drawn down either before or after the end of the year. Calculate working capital and the current ratio at year$-$end under each situation, assuming that early payment of accounts payable is not made.

When would you recommend that the loan be taken?

Answer rating: 100% (QA)

To calculate working capital and the current ratio in each situation 1 Working Capital Curre... View the full answer