Question

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

		Toulouse Co.			Lautrec Co.
Assets
Cash		$122,000			$332,000
Receivables		225,000			313,000
Inventories		564,000			541,000
Total current assets		911,000			1,186,000
Other assets		502,000			638,000
Total assets		$1,413,000			$1,824,000
Liabilities and Stockholders’ Equity
Current liabilities		$299,000			$353,000
Long-term liabilities		398,000			502,000
Capital stock and retained earnings		716,000			969,000
Total liabilities and stockholders’ equity		$1,413,000			$1,824,000
Annual sales		$964,000			$1,548,000
Rate of gross profit on sales		30	%		40	%

Each of these companies has requested a loan of $50,000 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

Answer 1