Problem 4: As loan analyst for Second Bank, you have been presented the following information....
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Problem 4: As loan analyst for Second Bank, you have been presented the following information. Pink Co. Blue Co. Assets Cash 120,000 320,000 Receivables 220,000 302,000 Inventories 570,000 518,000 Total current assets 910,000 1,140,000 Other assets | 500,000 612,000 Total Assets 1,410,000 1,752,000 Liabilities and Stockholder's Equity Current liabilities 305,000 350,000 Long-term liabilities 400,000 500,000 Capital Stock and Retained Earnings 705,000 902,000 Total liabilities and Stockholder's equity 1,410,000 1,752,000 Annual Sales Rate of Gross Profit on sales 930,000 1,500,000 30% 40% Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted. Question: Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year
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