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
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