QUESTION 77 You are a newly hired analyst hired by the bank and on your first assignment you are asked to assess two potential loan candidates. Both are in the retail business and after looking at the financial statements you foll the following the following ratios would help you to evaluate and compare the liquidity of the two businesses Business A Business B Current Ratio 1.31 1.84 Quick Ratio 0.80 0.42 Inventory Turnover Ratio 3.1 Accounts payable turnover Ratio Required: Wille a report to your manager evaluating and comparing the liquidity and activity of the two businesses and decide which company you would rather lend money to TT T Arial (1200) T IE Revenues Cost of goods sold Gross Margin Operating expenses Net Income Set 1 $500,000 360.000 140,000 54.000 $86.000 Set 2 $500,000 375.000 125,000 70.000 550.000 Cash $25,000 $25,000 Accounts receivable, net 80,000 84,000 Inventory 70,000 55,000 Capital assets, net 425,000 400,000 Current liabilities (90,000) (90,000) Long-term liabilities (250,000) (250,000) Shareholders' equity (260,000) (224,000) Required Determine which set of financial statements was prepared using FIFO and which was prepared using average costs. The price of Inventory has been dropping Explain how you arrived at this conclusion. No marks will be rewarded for guessing. QUESTION 79 Using the financial Information for Confused Ltd above. Determine which set of financial statements was prepared using declining balance depreciation of 20% and which set was using straight line amortization of 20 years? Explain how you arrived at these results and no marks will be awarded for guessing. For the toolbar, presa ALT+F 10 (PC) O ALT+FN+F10 (Mac) TT T Ara 31120) T. E. E 2 QUESTION 80 Using the financial Information for Confused Ltd above. Determine the following 1) Which set made the company appear to be more profitable? Do you agree with the results 2) Why did the amount of cash remain the same? Be sure to explain how you arrived at your answers and no marks will be awarded for guessing