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*

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.

jeff jeffy answered 3 years ago

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