Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the foll

Question

Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the following information. Toulouse Co. Lautrec Co. Assets Cash Receivables Inventories $316,700 302,000 514,700 4,9001,133,400 618,800 $1,423,300 $1,752,200 $110,100 225,800 579,000 Total current assets Other assets 508,400 Total assets Liabilities and Stockholders Eauity Current liabilities Long-term liabilities Capital stock and retained earnings $349,700 508,400 894,100 $1,423,300 $1,752,200 $941,900 $1,490,900 $300,600 400,100 722,600 Total liabilities and stockholders equity Annual sales Rate of gross profit on sales 30 % 40 %

Explanation / Answer

Toulouse Co. Lautrec Co. Current Ratio = current asset/current liabilities (110100+225800+579000)/300600 (316700+302000+514700)/349700 3.04 3.24 Acid Test Ratio = Quick asset/current liabilities (110100+225800+)/300600 (316700+302000)/349700 1.12 1.77 Accounts Receivable turnover = Turnover/Accounts Receivable 941900/225800 1490900/302000 4.17 4.94 Inventory Turnover = Turnover/Inventory 941900/579000 1490900/514700 1.62677 2.896639 Cash to current liabilities = Cash/Current liabilities 941900/110100 1490900/316700 8.55495 4.70761 Bank should give loan to Lautrec Co. as It has got better financial parameters compared to Toulouse Co.

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