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Questions 1,2,3 Problems LOAN TO BOOK PUBLISHER. Suppose that RSM Publishing Company, a children's book publisher, has approached your bank and wants to borrow $250,000
Questions 1,2,3
Problems LOAN TO BOOK PUBLISHER. Suppose that RSM Publishing Company, a children's book publisher, has approached your bank and wants to borrow $250,000 in working cap ital. The firm provides you with the following balance sheet and income statement data: Assets Cash Accounts receivable Inventory Fixed assets Total assets $50,000 $375,000 $510,000 $925,000 $1,860,000 Liabilities and Equity Accounts payable $166,000 Accrued expenses $37,000 Notes payable $75,000 Current maturity of long-term debt $25,000 Long-term debt $475,000 Equity $1,082,000 Total liabilities and equity $1,860,000 Sales: $4,622,800 Cost of goods sold: $3,504,100 Operating expenses: $893,000 Purchases $3,116,000 1. What fraction of the firm's current assets is implicitly) being funded with long-term debt or equity? What is the significance if this figure is large versus small? 2. Assuming a 365-day year, calculate the firm's asset cash-to-cash cycle, liability cash- to-cash cycle, and days deficiency. Using this information and the procedure described in the text, estimate the firm's working capital loan needs. 3. What general concerns might you have regarding this loan request? Problems LOAN TO BOOK PUBLISHER. Suppose that RSM Publishing Company, a children's book publisher, has approached your bank and wants to borrow $250,000 in working cap ital. The firm provides you with the following balance sheet and income statement data: Assets Cash Accounts receivable Inventory Fixed assets Total assets $50,000 $375,000 $510,000 $925,000 $1,860,000 Liabilities and Equity Accounts payable $166,000 Accrued expenses $37,000 Notes payable $75,000 Current maturity of long-term debt $25,000 Long-term debt $475,000 Equity $1,082,000 Total liabilities and equity $1,860,000 Sales: $4,622,800 Cost of goods sold: $3,504,100 Operating expenses: $893,000 Purchases $3,116,000 1. What fraction of the firm's current assets is implicitly) being funded with long-term debt or equity? What is the significance if this figure is large versus small? 2. Assuming a 365-day year, calculate the firm's asset cash-to-cash cycle, liability cash- to-cash cycle, and days deficiency. Using this information and the procedure described in the text, estimate the firm's working capital loan needs. 3. What general concerns might you have regarding this loan requestStep by Step Solution
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