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

ID: 342222 • Letter: E

Question

Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the following information. Toulouse Co. Lautrec Co. Assets Cash $111,800 $311,100 Receivables 210,100 306,000 Inventories 575,300 513,100 Total current assets 897,200 1,130,200 Other assets 502,100 610,200 Total assets $1,399,300 $1,740,400 Liabilities and Stockholders’ Equity Current liabilities $303,300 $349,800 Long-term liabilities 394,800 502,100 Capital stock and retained earnings 701,200 888,500 Total liabilities and stockholders’ equity $1,399,300 $1,740,400 Annual sales $936,200 $1,502,900 Rate of gross profit on sales 25 % 40 % Each of these companies has requested a loan of $50,640 for 6 months with no collateral offered. Because 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.) Toulouse Co. Lautrec Co. Current ratio : 1 : 1 Acid-test ratio : 1 : 1 Accounts receivable turnover times times Inventory turnover times times Cash to current liabilities : 1 : 1

Explanation / Answer

Answer:

1

Toulouse Co

Lautrec Co.

Current ratio
=Current assets/ current liability

Current assets

897200

1130200

current liability

303300

349800

Current ratio
=Current assets/ current liability

2.96  

3.23

1

Toulouse Co

Lautrec Co.

Current ratio

2.96 : 1

3.23 :

2

Acid-test ratio

Toulouse Co

Lautrec Co.

Acid-test ratio
=Cash+ receivable/current liability

Cash+ receivable

321900

617100

current liability

303300

349800

Acid-test ratio
=Cash+ receivable/current liability

1.06

1.76

Toulouse Co

Lautrec Co.

Acid-test ratio

1.06 : 1

1.76 : 1

3

Accounts receivable turnover

Accounts receivable turnover
=Annual sale/ receivable

Annual sale

936200

1502900

Receivable

210100

306000

Accounts receivable turnover
=Annual sale/ receivable

4.46 times

4.91 times

4

times Inventory turnover
=Cost of goods sold/ inventory

Sales

936200

1502900

x (1-GP ration)

75%

60%

Cost of goods sold

702150

901740

Inventory

575300

513100

times Inventory turnover
=Cost of goods sold/ inventory

1.22 times

1.76 times

5

Cash to current liabilities
=Cash / current liabilities

Cash

111800

311100

current liabelity

303300

349800

Cash to current liabilities
=Cash / current liabilities

0.37

0.89

0.37   : 1

0.89 : 1

1

Toulouse Co

Lautrec Co.

Current ratio
=Current assets/ current liability

Current assets

897200

1130200

current liability

303300

349800

Current ratio
=Current assets/ current liability

2.96  

3.23