Question
This is a sample question in my text book. I am using it to study. Natalie and Curtis are thinking about borrowing an additional $20,000
This is a sample question in my text book. I am using it to study.
Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semi-annual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,400. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate.
Complete the tasks listed below.
- Calculate the following ratios:
- current ratio,
- accounts receivable turnover,
- inventory turnover,
- debt to assets ratio,
- times interest earned,
- gross profit rate,
- profit margin,
- asset turnover,
- return on assets, and
- return on common stockholders' equity.
- Comment on your findings from item "a."
- Based on your analysis in items "a" and "b", do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Explain your reasoning.
- What alternatives could Cookie & Coffee Creations Inc. consider instead of bank financing?
Complete your calculations for item "a" in either an Excel spreadsheet or a Word document. If you complete item "a" in an Excel spreadsheet, complete items "b-d" in a Word document, and submit the Excel spreadsheet and the Word document in Blackboard. If you complete items "a-d" in a Word document, submit your calculations to item "a" and your responses for items "b-d" in a single Word document in Blackboard. Your total submission should be a minimum of two pages in length, including your calculations. Include at least two references. Adhere to APA Style when creating citations and references for this assignment.
I will not be submitting this assignment as my own.
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