LAGER Ltd, a reputable company, listed on the stock exchange, has had the following balance...
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LAGER Ltd, a reputable company, listed on the stock exchange, has had the following balance sheets over the last 3 years (expressed in $million). It is considering investing $25 million in a new fixed asset, and has asked you, its banker, to finance the entirety of this amount by a five years loan. a) Assuming the need to invest $25 million was well founded, would you, from a pure risk perspective, approve the loan? Why and why not? (Justify your analysis with the appropriate financial ratios). (12 marks) b) What other factors you would consider in addition to the financial performance in (a) to grant the loan to LAGER Ltd.? Why? (3 marks) LAGER 2016 70 2017 98 2018 138 Fixed assets Paid up Capital Retained earnings 2016 30 30 2017 30 42 2018 30 56 39 50 Inventory Acct receivables Marketable securities Cash 28 36 11 1 55 70 7 1 4 Long Term debt Account payable Short Term debt 21 6 84 29 8 133 41 11 2 Total Assets 146 193 271 Total Liabilities 146 193 271
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