Liquidity ratios and limitations) Manitoba Manufacturing Inc. (MMI) has a loan from the Canadian National...
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Liquidity ratios and limitations) Manitoba Manufacturing Inc. (MMI) has a loan from the Canadian National Bank to help finance its working capital. The terms of the loan are that the bank will lend MMI an amount up to 34% of its inventory balance and 50% of its accounts receivable. One of the loan covenants requires that MMI maintain a current ratio greater than 2. Information related to MMIs current assets and current liabilities is shown in the following table:
| In thousands | 2020 | 2019 | ||
| Cash | $126 | $158 | ||
| Accounts receivable | 901 | 848 | ||
| Inventory | 1,969 | 1,646 | ||
| Other current assets | 226 | 275 | ||
| Bank loan, current | 406 | 192 | ||
| Accounts payable | 957 | 976 | ||
| Other current liabilities | 42 | 82 |
Question a) Does MMI satisfy the loan covenant in both years? (Round answers to 1 decimal place, e.g. 18.4.)
| 2020 | 2019 | |
| Current ratio | ______ times | ______ times |
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