Assume that the corporation has complied with all the necessary permits to start the business and has been operating for 1 year. In his eagerness to provide greater services, he asks the CPA to prepare the financial statements at the close of his first year of operations for the sole purpose of requesting a loan of $ 1,000,000 from a local bank.
Assume that you are the official of the financial institution and will use the knowledge acquired in the class, Introduction to Financial Accounting, to decide whether or not to grant the loan to the corporation using the necessary financial tools to evaluate profitability. , liquidity, efficiency and solvency of the company.
to. Mention 4 financial evaluation tools (ratio) that you would use in the financial evaluation of the corporation and explain how you will use each one of them.
b. Explain in detail the use that you would give to the Income Statements and the Balance Sheet, in the financial evaluation of the company. Present your argument for separate financial statements.
c. At the close of the first year of operations, the corporation's financial statements reflected the following activities:
i. Income Statements
1. Income received $ 5,000,000
2. Operating expenses $ 5,500,000
ii. Statement of Financial Situation or Condition (Balance Sheet)
1. Capital (Equity) $ 4,400,000
2. Cash $ 2,000,000