These two comoanies are in the same business and state but different cities. Each compan has been in openation or sbout vetrason companies received an unauained aust oomion on the financial statements. Royale Company wants to borrow $75,000 cash and Cavalier Company Is asking for 330.000. The loans will be for a two-year penod. Both companies estmate bad debt based on an agine analvsis but Cavalier has estimated slightly higner uncollectble rates that Rovale Neither company issued stock in the current wear. Assume the end-of-vear total assets net cauinment balances annroximate the sear's averace and all sales are on account.

Required: Calculate the ratios in Exhibit 13.5 for which sufficient information is available. Round all calculations to two decimal places.

Assume that you work in the loan department of a local bank. You have been asked to analyze the situation and recommend which loan is preferable. Based on the data given, your analysis prepared in requirement 1, and any other information, give your choice and the supporting explanation.