Question

In: Finance

Fill out the following balance sheet and conduct a ratio analysis. Discuss your reasons for granting...

Fill out the following balance sheet and conduct a ratio analysis. Discuss your reasons for granting or denying an additional loan.

Assets

Liabilities

Current Assets

$40,000

Current Liabilities

$60,000

Non-current Assets

Non-current Liabilities

$50,000

Total Liabilities

Owner Equity

Total Assets

Liabilities plus Equity

$280,000

Solutions

Expert Solution

Answer :

Non-Current Asset = 280000 - 40000 ==> 240000

Owner Equity = 280000 - 60000 - 50000 ==> 170000

Ratio Analysis for additional loan with given information :

1. Debt-Equity Ratio = Non current liablity / Owner Equity

= 50000 / 170000 = 0.29

2. Current Ratio = Current Asset / Current Liablity

= 40000 / 60000 = 0.67

3. Debt- Asset Ratio = Non current liablity / Total Asset

= 50000 / 280000 = 0.18

So with the ratio calculated above, company can get additional loan. As its debt-equity & debt-asset is under acceptable limit.


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