The following amounts were reported by Leau Ltd. in its most recent statement of financial position:

Required

a. Calculate the current ratio and quick ratio for Leau Ltd.

b. Leau Ltd.’s bank loan includes covenants related to minimum current and quick ratios that the company must maintain. The covenants state that the company must maintain a current ratio of 1.4 or more, and a quick ratio of 0.65 or more. Has the company been able to achieve the minimum ratios this year? What are the implications if they have not?

c. How would a $100,000 loan, which would be repayable in three years, aff ect your analysis in part “b”? 

d. What other strategies could management consider that could help the company improve its current position? What risks, if any, may be associated with the strategy you have suggested?

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Accounts payable Wages payable Income tax payable Unearned revenue Bank loan payable (due in 5 years) Cash $ 32,600 $602,300 32,800 Accounts receivable 396,200 Inventory Prepaid insurance Property, plant, and equipment (net) 715,800 62,300 17,100 96,600 1,632,200 50,000