You are a loan officer for Premier Bank of Port Washington. Rick Gleason, president of R. Gleason
Question:
You are a loan officer for Premier Bank of Port Washington. Rick Gleason, president of R. Gleason Corporation, has just left your office. He is interested in an 8-year loan to expand the company's operations. The borrowed funds would be used to purchase new equipment. As evidence of the company's debt-worthiness, Gleason provided you with the following facts. Current ratio Asset turnover ratio Cash debt coverage ratio Net income 2004 2003 3.1 2.1 2.8 2.2 .1 .2 Up 32% Down 8% $3.30 Earnings per share $2.50 Rick Gleason is a very insistent (some would say pushy) man. When you told him that you would need additional information before making your decision, he acted offended, and said, "What more could you possibly want to know?" You responded that, at a min- imum, you would need complete, audited financial statements.
Instructions With the class divided into groups, answer the following.
(a) Explain why you would want the financial statements to be audited.
(b) Discuss the implications of the ratios provided for the lending decision you are to make. That is, does the information paint a favorable picture? Are these ratios rele- vant to the decision?
(c) List three other ratios that you would want to calculate for this company, and explain why you would use each.AppendixLO1
Step by Step Answer:
Financial Accounting Tools For Business Decision Making
ISBN: 9780471691952
3rd Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso