Sunshine Ltd is a manufacturing company producing and selling environmental friendly toilet papers. It has applied for a long term loan of $500,000 in NZ Bank to buy new manufacturing equipment due to high demand for its products. You are a loan officer at NZ Bank. Your assistant has prepared the following financial statements, industry benchmark ratios to help you evaluate Sunshine Ltd's loan application.

Required: Discuss whether you should approve the loan for Sunshine Ltd. (Template is provided on pages 3-5 for your working).

WORKING Process:

Profitability to investment:		Sunshine Ltd 20x2	Industry 20x2
Return on Assets (ROA)
Return on Equity (ROE)

Profitability to investment ratio Analysis:

• Return on assets:

• Return on Equity:

Short-term financial risk (liquidity)		Sunshine Ltd 20x2	Industry 20x2
Current Ratio
Inventory Turnover times
Days in Inventory

Short-term financial risk (liquidity) Analysis:

• Current Ratio:

• Days in Inventory:

Long-term financial risk (Gearing/Solvency)		Sunshine Ltd 20x2	Industry 20x2
Debt Ratio
Interest coverage ratio

Long-term financial risk (Gearing/Solvency) Analysis:

• Debt Ratio:

• Interest coverage ratio:

Conclusion: Should you approve the loan for Sunshine Ltd?