Question: Lancer Boutique reported the following financial data for 2010 and 2009. Instructions (a) Calculate the current ratio for Lancer Boutique for 2010 and 2009. (b)

Lancer Boutique reported the following financial data for 2010 and 2009.

Instructions
(a) Calculate the current ratio for Lancer Boutique for 2010 and 2009.
(b) Suppose that at the end of 2010, Lancer Boutique used $1.5 million cash to pay off $1.5 million of accounts payable. How would its current ratio change?
(c) At September 30, Lancer Boutique has an undrawn operating line of credit of $12.5 million. Would this affect any assessment that you might make of Lancer Boutique€™s short-term liquidity?Explain.

LANCER BOUTIQUE Balance Sheet (partial) September 30 (in thousands) 2010 2009 Current assets Cash and short-term deposits Accounts reccivable Inventories Other current assets $2,574 2,347 1,201 322 $1,021 1,575 1,010 192 $3,798 $3,508 $6,444 $4,803 Total current assets Current liabilities

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a Current ratio 20106444 4803 1341 20093798 3508 1081 b Current ratio 6444 ... View full answer

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