Question
T. P. Jarmon Company Balance Sheets 2012 2013 Cash $15,100 $14,100 Marketable securities 6,000 6,210 Accounts receivable 42,100 33,000 Inventory 50,900 83,900 Prepaid rent 1,190
T. P. Jarmon Company Balance Sheets 2012 2013 Cash $15,100 $14,100 Marketable securities 6,000 6,210 Accounts receivable 42,100 33,000 Inventory 50,900 83,900 Prepaid rent 1,190 1,110 Total current assets $115,290 $138,320 Net plant and equipment 286,100 270,000 Total assets $401,390 $408,320 2012 2013 Accounts payable $48,100 $57,000 Notes payable 15,100 13,000 Accruals 5,990 5,010 Total current liabilities $69,190 $75,010 Long-term debt 159,900 149,900 Common stockholders' equity 172,300 183,410 Total liabilities and owners' equity $401,390 $408,320
(Financial statement analysis) The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $600,100 for the year just ended, and its total assets exceeded $500,000. The company was started by Mr. Jarmon just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has decided to seek a line of credit from the firm's bank totaling $80,000. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Vehlim wants to use the line of credit to supplant a large portion of the firm's payables during the summer, which is the firm's peak seasonal sales period. The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided. These statements are found in the following tables: Jan Fama, associate credit analyst for the Merchants National Bank of Midland, Michigan, was assigned the task of analyzing Jarmon's loan request. a. Calculate the following financial ratios for 2013: B b. Which of the ratios calculated in part (a) do you think should be most crucial in determining whether the bank should extend the line of credit? c. Use the information provided by the financial ratios and industry-norm ratios to decide if you would support making the loan. Discuss the basis for your recommendation. a. Calculate the following financial ratios for 2013: - X Data table - x Data table T. P. Jarmon's current ratio is (Round to two decimal places.) T. P. Jarmon Company Balance Sheets Cash Marketable securities Accounts receivable Inventory Prepaid rent Total current assets Net plant and equipment Total assets 2012 $15,100 6,000 42,100 50.900 1,190 $115,290 286,100 2013 $14,100 6,210 33,000 83,900 1,110 $138,320 270,000 Current ratio Acid-test ratio Debt ratio Times interest earned Average collection period Inventory turnover (based on cost of goods sold) Return on equity Operating return on assets Operating profit margin Total asset turnover Fixed asset turnover Ratio Norms 1.80 0.90 50.0% 10.00 20.0 7.00 12.0% 16.8% 14.0% 1.20 1.80 $401,390 $408,320 2012 $48,100 15,100 5,990 (Click on the icon in order to copy its contents into a spreadsheet.) Accounts payable Notes payable Accruals Total current liabilities Long-term debt Common stockholders' equity Total liabilities and owners' equity 2013 $57,000 13,000 5,010 $75,010 149,900 183,410 $69,190 159,900 172,300 Print Done $401,390 $408,320 (Financial statement analysis) The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $600,100 for the year just ended, and its total assets exceeded $500,000. The company was started by Mr. Jarmon just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has decided to seek a line of credit from the firm's bank totaling $80,000. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Vehlim wants to use the line of credit to supplant a large portion of the firm's payables during the summer, which is the firm's peak seasonal sales period. The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided. These statements are found in the following tables: Jan Fama, associate credit analyst for the Merchants National Bank of Midland, Michigan, was assigned the task of analyzing Jarmon's loan request. a. Calculate the following financial ratios for 2013: B b. Which of the ratios calculated in part (a) do you think should be most crucial in determining whether the bank should extend the line of credit? c. Use the information provided by the financial ratios and industry-norm ratios to decide if you would support making the loan. Discuss the basis for your recommendation. a. Calculate the following financial ratios for 2013: - X Data table - x Data table T. P. Jarmon's current ratio is (Round to two decimal places.) T. P. Jarmon Company Balance Sheets Cash Marketable securities Accounts receivable Inventory Prepaid rent Total current assets Net plant and equipment Total assets 2012 $15,100 6,000 42,100 50.900 1,190 $115,290 286,100 2013 $14,100 6,210 33,000 83,900 1,110 $138,320 270,000 Current ratio Acid-test ratio Debt ratio Times interest earned Average collection period Inventory turnover (based on cost of goods sold) Return on equity Operating return on assets Operating profit margin Total asset turnover Fixed asset turnover Ratio Norms 1.80 0.90 50.0% 10.00 20.0 7.00 12.0% 16.8% 14.0% 1.20 1.80 $401,390 $408,320 2012 $48,100 15,100 5,990 (Click on the icon in order to copy its contents into a spreadsheet.) Accounts payable Notes payable Accruals Total current liabilities Long-term debt Common stockholders' equity Total liabilities and owners' equity 2013 $57,000 13,000 5,010 $75,010 149,900 183,410 $69,190 159,900 172,300 Print Done $401,390 $408,320Step by Step Solution
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