Question
Mattel Toy Manufacturing has an outstanding $11 million loan with Wells Fargo Bank for the current year. As required in the loan agreement, Mattel reports
Mattel Toy Manufacturing has an outstanding $11 million loan with Wells Fargo Bank for the current year. As required in the loan agreement, Mattel reports selected data items to the bank each month. Based on the following information, is there any indication of a developing problem loan? About what dimensions of the firms performance should Wells Fargo Bank be concerned?
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| One | Two | Three | Four |
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| Current | Month | Months | Months | Months |
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| Month | Ago | Ago | Ago | Ago |
| Cash account (millions of dollars) | $33 | $57 | $51 | $44 | $43 |
| Projected sales (millions of dollars) | $298 | $295 | $294 | $291 | $288 |
| Stock price per share |
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| (monthly average) | $6.60 | $6.50 | $6.40 | $6.25 | $6.50 |
| Capital structure (equity/debt ratio |
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| in percent) | 32.8% | 33.9% | 34.6% | 34.9% | 35.7% |
| Liquidity ratio (current assets/ |
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| current liabilities) | 1.10x | 1.23x | 1.35x | 1.39x | 1.25x |
| Earnings before interest and taxes |
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| (EBIT; in millions of dollars) | $15 | $14 | $13 | $11 | $13 |
| Return on assets (ROA; percent) | 3.32% | 3.25% | 2.98% | 3.13% | 3.11% |
| Sales revenue (millions of dollars) | $290 | $289 | $290 | $289 | $287 |
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Personal Finance An Integrated Planning Approach
Authors: Ralph R Frasca
8th edition
136063039, 978-0136063032
