E24-4 (Ratio Computation and Analysis; Liquidity) As loan analyst for Madison Bank, you have been presented the following information. Plunkett Co. Herring Co. Assets Cash $ 120,000 $ 320,000 Receivables 220,000 302,000 Inventories 570,000 518,000 Total current assets 910,000 1,140,000 Other assets 500,000 612,000 Total assets $1,410,000 $1,752,000 Liabilities and Stockholders Equity Current liabilities $ 300,000 $ 350,000 Long-term liabilities 400,000 500,000 Common stock and retained earnings 710,000 902,000 Total liabilities and stockholders equity $1,410,000 $1,752,000 Annual sales $ 930,000 $1,500,000 Rate of gross profit on sales 30% 40% Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted. Instructions Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year