Business, 12.12.2019 05:31 Kaytlynshue2443

Scrubber, inc, presented the following information in a note to its financial statements for the year ending december 31, 2016.

the company has a loan agreement with mountain state bank that states:

1. the current ratio should remain at least 2.0 to 1 at all times.

2. the debt-to-equity ration should not exceed .7 to 1 at any times.

3. the company must maintain $75,000 cash at all times.

the ratios at year-end are: current ratio, 2.3. to 1 and debt-to-equity ratio, .2 to 1. the amount of cash on the bank statement is $75,400, but the cash account after the adjustments from the bank reconciliation has a balance of $74,900. has scrubber violated its loan agreement?

a. no

b. yes, the cash balance is less than $75,000

c. yes, the current ratio is .3 or 30% larger than the agreement indicates.

d. yes, the cash balance is less than $75,000, and the debt-to-equity ratio is overstated.

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