Banks provide loans to their customers based on evaluation of their customer's portfolio. On component of the portfolio is the ratio analysis of the customer's financial statements that are provided by the customer at the time of the company's application. Below are financial data (the ratios) of two customers that the bank is interested to provide loans. The bank can extent a loan agreement to only one of the two customers Required: Based on the financial ratios below determine the following: a) (2 Marks) Determine if the ratio for each customer is favorable or unfavorable. b) Disclose which company has 1) (2 Marks) better liquidity (Ratio 1-6) 2) (1 mark) debt obligations (debt ratios) (7-11) 3) (1 mark) taking into account profitability and liquidity and debt ratios conclude to which company the bank should extent the loan agreement. Ratio Company Favorable Company Favorable Liquidity Debt A UnFavor UnFavor A or B A or B 1. Current ratio 2.5 to 1 4 to 1 2. Quick ratio 2 to 1 3 10 to 1 3. Accounts receivable turnover 3 times 7 times 4. Days sales outstanding 121 days 52 days 5. Inventory turnover 5 times 4 times 6. Days inventory on hand 73 days 91 days 7. Debt to equity ratio 25% 32% 8. Debt to total assets 30% 20% 9. Long term bank loans to total assets 20% 10. Bank loans to building and fixed assets 10% 11. Profit Margin on sales 12. Earnings per share 25% 15% 596 4%