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Rickos Rickos
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8 years ago
Baker & Co. has applied for a loan from the Trust Us Bank in order to invest in several potential opportunities. In order to evaluate the firm as a potential debtor, the bank would like to compare Baker & Co. to the industry. The following are the financial statements given to Trust Us Bank:

Balance Sheet    12/31/15   12/31/16
Cash    $305   270
Accounts receivable    275   290
Inventory    600   580
Current assets    1,180   1,140
Plant and equipment    1,700   1,940
Less: acc depr     (500)   (600)
Net plant and equipment    1,200   1,340
Total assets    $2,380   $2,480
Liabilities and Owners' Equity
Accounts payable    $150   $200
Notes payable      125   0
Current liabilities      275   200
Bonds      500   500
Owners' equity
Common stock    165   305
Paid-in-capital    775   775
Retained earnings      665   700
Total owners' equity    1,605   1,780
Total liabilities and owners' equity    $2,380   $2,480
Income Statement
Sales (100% credit)    $1,100   $1,330
Cost of goods sold      600   760
Gross profit    500   570
Operating expenses    20   30
Depreciation      160   200
Net operating income    320   340
Interest expense        64   57
Net income before taxes    256   283
Taxes      87   96
Net income    $169   $187

a.   What are the firm's financial strengths and weaknesses?
b.   Should the bank make the loan? Why or why not?
Textbook 
Financial Management: Principles and Applications

Financial Management: Principles and Applications


Edition: 13th
Authors:
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David_hessDavid_hess
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Rickos Author
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8 years ago
Thanks
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Yesterday
Brilliant
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2 hours ago
Good timing, thanks!
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