Rhonda Rancher has applied for a loan. Her banker, Larry Loanmaker, says the old balance sheet on file must be brought up to date before a loan will be considered. Rhonda spends the rest of the afternoon taking inventory and gathering other information. Complete the balance sheet on the attached pages using the information below compiled by Rhonda on February 15.

Milo on hand 4200 cwt. @ $4.40 per cwt.

Hay on hand 75 tons @ $50.00 per ton

Growing wheat 280 acres @ $22.50 per acre

Farm mortgage (due 4/01) $14,000 principal

$20,000 accrued interest

balance after 4/01 payment $208,000

Buildings & improvements $48,000

Note payable on feeder cattle (all due 11/15) $34,000

Calves (to be sold in May) 98 head @ $275 per head

Feeder cattle (to be sold in 60 days) 138 head @ $575 per head

Note payable at bank (all due 3/1) $52,000

Vehicles $15,500

Other machinery & equipment $80,500

Loan on beef cows (due 10/01) $9,000 principal,

$3,900 accrued interest

balance after 10/1 payment $38,000

Land (present market value) 1020 acres @ $560 per acre

Beef breeding cows 106 head @ $650 per head

Bulls 4 head @ $1,000 each

Checking account balance $5,400

Account payable at Joe's Feed & Seed $4,200

Account receivable $1,600

Shop Equip. (welder, lathe, drill press, etc.) $2,000

Ford Motor Co. stock 200 shares @ $65 per share

Other Information

1) Has paid in advance for $6,000 worth of feed in order to get a good price on it. The feed will be delivered in May.

2) Income and social security taxes on last years income is estimated at $7,200.

3) Rhonda contributed $50,000 to get her business started.

4) Retained earnings since the beginning of the business equals $305,000.

1. What is Rhonda's owner's equity as of February 15?

2. How much working capital does Rhonda have?

3. What is her current ratio?

4. What is her debt/asset ratio?

5. What is her debt/equity ratio?

6. What is her equity/asset ratio?

7. Assume you are a financial consultant hired by Rhonda to analyze her financial condition. Based on this balance sheet, what part of her financial condition is most in need of improvement? WHY?

8. What does this balance sheet tell you about the amount of profit Rhonda made last year? Explain your answer?

9. Rhonda wants to borrow $50,000 from the bank to buy additional beef breeding cows. They will cost $50,000. Assume the loan is made, the cows are purchased.

a) What will Rhonda's owner's equity be immediately after the transactions are completed if there are no other changes on her balance sheet?

b) What will her debt/asset ratio be?

c) What will be her debt/equity ratio be?

10. If you were Larry Loanmaker, would you loan Rhonda the money? Why?