Question
Argo Airlines, a privately held firm, is looking to buy additional gates at its home airport for $635,000 Argo has $200,000 in the bank but
Argo Airlines, a privately held firm, is looking to buy additional gates at its home airport for $635,000 Argo has $200,000 in the bank but that money may not be spent as it is used to pay salaries, suppliers, and equipment Argo asked its bank for a loan but the bank refused saying that Argo's interest-bearing debt to equity was too high at 3.1 The bank said that Argo needed to lower that ratio below 2.3 in order to get the loan Separately, SkyBlue Airlines has approached Argo to see if Argo will buy it.
Argo's CFO hired you to help with the following tasks:
Argo's forecast balance sheet has been included in the Excel file, so you need do nothing to it However, the CFO has asked you to consolidate the two balance sheets - the Argo one given to you and the SkyBlue one that you calculated. Once these two are consolidated, you are asked to calculate three debt ratios, as listed in the file.
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