Presented below is the financial information of two companies—A and B, belonging to the same industry:

Assume you are loan officer of a bank and both the companies have requested a loan of equal amount to be repaid over the next two years. Based on the information above,

(a) If you could grant a loan to only one company, which would it be? Explain.

(b) If you could grant a loan to both the companies, would you be willing to do so? Explain.

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Particulars Current ratio Acid-test ratio Debt-equity ratio (percentage) Number of times interest earned A 3.2:1 1.7:1 30 6 B 2.0:1 1.1:1 40 5