You are the loans manager at a local bank. Two companies have approached you about securing a 6-month loan.

1. Calculated and answer columns D, F, H, J; put the units to columns E and G.

2. Based on your calculations, which company you would approve the loan for? Why?

Thank you!

ARROW LTD. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 CANADIAN DOLLARS (millions of dollars) Revenue Sales Revenue * Rent Revenue Interest Revenue Other Revenues Total revenues $1,461 516 394 258 $ 2,629 Operating expenses Cost of Goods sold Wages expense Salary expense Benefit expense Research and development expense Repairs and maintenance expense Sales and distribution costs expense Depreciation expense - equipment Depreciation expense - vehicles Depreciation expense - furniture Depreciation expense - Office building Insurance expense Property taxes expense Food and beverage expense Supplies expense Interest expense Information technology expense Advertising expense Total operating expenses Profit before income tax Income Tax expense Profit 385 330 142 201 26 65 174 16 6 9 5 6 51 142 80 65 25 94 1,822 807 202 605 * Denotes all of these sales were made on credit ARROW LTD. STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2019 CANADIAN DOLLARS (millions of dollars) ASSETS Current assets Cash Short-term investments Accounts receivable Inventory Spare parts and supplies inventory Prepaid Maintenance Prepaid expenses Total current assets $1,741 715 239 67 70 203 56 $3,091 Investments 123 63 2,580 Property plant and equipment Land Office Building Less: Accumulated depreciation Equipment Less: Accumulated depreciation Vehicles Less: Accumulated depreciation Furniture Less: Accumulated depreciation Total property, plant and equipment $ 2,801 221 1,642 551 556 227 269 26 1,091 329 243 4,306 Intangible assets Trademark Patent Total intangible assets Total Assets 62 27 89 7,609 Liabilities and Shareholders' Equity Current Liabilities Accounts payable 531 Current Liabilities Accounts payable Accrued liabilities Deferred Revenue Current portion of bank loan and mortgage payable Income Tax payable Total Current Liabilities 531 201 514 484 414 2,144 Non-current liabilities Bank loan payable Mortgage Payable Bond payable Total Non-current liabilities 420 285 1,056 1,761 Total Liabilities 3,905 Shareholders' Equity Preferred Shares ** Common Shares *** Retained Earning Total Shareholders' Equity 464 928 2,312 3,704 Total liabilities and shareholders' equity 7,609 ** There were no preferred dividends declared this year. *** The Weighted Average number of common shares outstanding are: The Market price per common share is : 20,000,000 45 ROOT LTD. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 CANADIAN DOLLARS (millions of dollars) $ Revenue Sales Revenue * Rent Revenue Interest Revenue Other Revenues Total revenues 1,097 582 103 98 $ 1,880 Operating expenses Cost of Goods sold Wages expense Salary expense Benefit expense Research and development expense Repairs and maintenance expense Sales and distribution costs expense Depreciation expense - equipment Depreciation expense - vehicles Depreciation expense - furniture Depreciation expense - Office building Insurance expense Property taxes expense Food and beverage expense Supplies expense Interest expense Information technology expense Advertising expense Total operating expenses Profit before income tax Income Tax expense Profit 385 266 140 188 30 74 175 13 11 3 13 20 52 63 64 56 19 258 1,830 50 13 37 * Denotes all of these sales were made on credit ROOT LTD. STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2019 CANADIAN DOLLARS (millions of dollars) ASSETS $ Current assets Cash Short-term investments Accounts receivable Inventory Spare parts and supplies inventory Prepaid Maintenance Prepaid expenses Total current assets 1,955 583 280 85 95 272 48 S 3,318 Investments 156 144 $ 1,383 Property plant, and equipment Land Office Building Less: Accumulated depreciation Equipment Less: Accumulated depreciation Vehicles Less: Accumulated depreciation Furniture Less: Accumulated depreciation Total property, plant and equipment 2,110 2,047 664 2,485 375 763 88 166 47 675 119 4,431 Intangible assets Trademark Patent Total intangible assets 60 25 85 Total Assets 7.990 Liabilities and Shareholders' Equity Current Liabilities Current Liabilities Accounts payable Accrued liabilities Deferred Revenue Current portion of bank loan and mortgage payable Income Tax payable Total Current Liabilities 908 184 420 499 571 2,582 Non-current liabilities Bank loan payable Mortgage Payable Bond payable Total Non-current liabilities Total Liabilities 577 330 2,096 3,003 5,585 Shareholders' Equity Preferred Shares ** Common Shares *** Retained Earning Total Shareholders' Equity 463 802 1,140 2,405 Total liabilities and shareholders' equity 7.990 ** There were no preferred dividends declared this year. *** The Weighted Average number of common shares outstanding are: 25,000,000 The Market price per common share is : 20 A B C E F G K H Is higher or lower better? J which company is better? Arrow Root 7 Liquidity Working Capital: Current Assets - Current Liabilities $ $ 736 Higher Not comparable Current Ratio: Current Assets Current Liabilities Quick Ratio: Cash + Short-term Investments + Accts Receivable Current Liabilities 1 Receivable Turnover: Credit Sales Accounts Receivable 1O Average Collection Period: 365 Receivable Turnover Page 1 Inventory Turnover: Cost of Goods Sold Inventory I Days in Inventory: 365 Inventory Turnover Solvency Debt to Total Assets: Total Liabilities Total Assets Times Interest Earned Profit+Interest Expense+Income Tax Expense Interest Expense Debt to Total Equity: Total Liabilities Total Equity A B D E F G . Ts higher or lower better? J which company is better? Arrow Root 7 Profitability Profit Margin: Profit Sales Return On Assets (ROA): Profit Total Assets Asset Turnover: Sales Total Assets Page 2 I IN IT Earnings Per Share: Profit - Preferred Dividends Weighted Average Number of Shares Price Earnings: Market Price per share EPS Return on Common Shareholder's Equity Profit - Preferred Dividends Common Shareholder's Equity