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.

Argos CFO hired you to help with the following task:

1. Finally, the CFO wants to know if the consolidated balance sheet's Debt/Equity ratio is below 2.5 if so, it will allow Argo to buy the gates. Is Argo's ratio low enough that it can borrow to buy the gates?

IMPORTANT: SHOW FORMULAS USED TO CALCULATE

BALANCE SHEET BELOW

A E 1 B Actual 2018 D Projected 2020 2019 2021 2 Balance Sheet 3 Cash 4 Notes and Acc. Rec. 5 Inventory 6 Prepaid 7 Current Assets 8 Other 9 Total Assets 10 11 Bank Loan 12 Payables 13 CPLTD 14 Other 15 Current Liabilities 16 LTD 17 Equity 18 Total Liabilities & Equity 19 20 Ratios: 21 Bank Loan to Receivables 22 Liabilities / Equity 23 Debt / Equity E D Projected 2020 250 9,998 B Actual 2018 240 7,013 5,588 192 13,033 3,325 16,358 7,905 2019 250 8,385 6,630 195 15,460 3,830 19,290 2021 Notes 250 12,040 9,520 280 22,090 5,105 27,195 232 18,385 4,393 22,778 1 2 Balance Sheet 3 Cash 4 Notes and Acc. Rec. 5 Inventory 6 Prepaid 7 Current Assets 8 Other 9 Total Assets 10 11 Bank Loan 12 Payables 13 CPLTD 14 Other 15 Current Liabilities 16 LTD 17 18 Equity 19 Total Liabilities & Equity 20 21 Ratios: 22 Bank Loan to Receivables 23 Liabilitics / Equity 24 Debt / Equity 6,070 3,057 433 1,477 11,037 2,458 7,586 3,705 450 1,712 13,453 2,008 9,321 4,417 450 1.994 16,182 1,558 11,404 5,320 450 2,350 19,524 1,108 2,863 16,358 3,829 19,290 5,038 22,778 6,563 27,195 0.9 4.7 3.1 0.9 4.0 2.6 0.9 3.5 2.2 0.9 3.1 2.0