As loan analyst for Utrillo Bank, you have been presented the following informat
ID: 2466916 • Letter: A
Question
As loan analyst for Utrillo Bank, you have been presented the following information.
Toulouse Co.
Lautrec Co.
Assets
Liabilities and Stockholders’ Equity
Each of these companies has requested a loan of $49,210 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.
Toulouse Co.
Lautrec Co.
Toulouse Co.
Lautrec Co.
Assets
Cash $125,700 $310,600 Receivables 215,400 303,400 Inventories 566,400 519,100 Total current assets 907,500 1,133,100 Other assets 494,900 617,800 Total assets $1,402,400 $1,750,900Liabilities and Stockholders’ Equity
Current liabilities $300,400 $350,400 Long-term liabilities 390,500 494,900 Capital stock and retained earnings 711,500 905,600 Total liabilities and stockholders’ equity $1,402,400 $1,750,900 Annual sales $932,800 $1,495,100 Rate of gross profit on sales 30 % 40 %Explanation / Answer
Current ratio = Current Assets / Current liabilities
Toulouse Co. :
Current ratio = 907500 / 300400 = 3.02
Lautrec Co :
Current ratio = 1133100 / 350400 = 3.23
Acid test ratio :
Acid test ratio = Current assets - inventory / current liabilities
Toulouse Co. :
Acid test ratio = 907500 - 566400 / 300400
= 341100 / 300400 = 1.14
Lautrec Co :
Acid test ratio = 1133100 - 519100 / 350400
= 614000 / 350400 = 1.75
Accounts receivable turnover = credit sales / Average accounts recceivables
Toulouse Co.:
Accounts receivables = 932800 / 215400 = 4.33 times
Lautrec Co:
Accounts receivables = 1495100 / 303400 = 4.93 times
Inventory turnover = cost of goods sold / average inventory
Tolouse Co :
Inventory turnover = 652960 / 566400 = 1.15 times
Lautrec Co:
Inventory turnover = 897060 / 519100 = 1.73
Cash to current liabilities = cash / current liabilities
Toulouse Co :
Cash to current liabilities = 125700 / 300400 = 0.42
Lautrec Co :
Cash to current liabilitiea = 310600 / 350400 = 0.89
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