As loan analyst for Madison Bank, you have been presented the following informat

Question

As loan analyst for Madison Bank, you have been presented the following information.

Each of these companies has requested a loan of $49,990 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.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

Current ratio

: 1

: 1Acid-test ratio

: 1

: 1Accounts receivable turnover

times

timesInventory turnover

times

timesCash to current liabilities

: 1

: 1

Plunkett Co. Herring Co. Assets Cash $120,300 $320,600 Receivables 229,000 305,900 Inventories 563,200 515,600    Total current assets 912,500 1,142,100 Other assets 492,100 619,900    Total assets $1,404,600 $1,762,000 Liabilities and Stockholders%u2019 Equity Current liabilities $293,000 $349,900 Long-term liabilities 402,900 492,100 Capital stock and retained earnings 708,700 920,000    Total liabilities and stockholders%u2019 equity $1,404,600 $1,762,000 Annual sales $932,900 $1,516,700 Rate of gross profit on sales 30 % 35 % As loan analyst for Madison Bank, you have been presented the following information. Each of these companies has requested a loan of $49,990 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. Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

Explanation / Answer

current ratio =plunkett 912500/293000=3.11

herring= 1142100/349900=3.26

acid test ratio=plunkt=349300/293000=1.19

herring= 626500/349900=1.79

a/r turnover=932900/229000=4.07

herring=1516700/305900=4.96

inventory turnover= 932900/563200=1.66

herring=1516700/515600=2.94

cash to current liability=120300/293000=0.41

herring= 320600/349900=0.92

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