The financial statements for Royale and Cavalier companies are summarized here:

These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $ 75,000 cash and Cavalier Company is asking for $ 30,000. The loans will be for a two- year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end- of- year total assets and net equipment balances approximate the year€™s average and all sales are on account.
Required:
1. Calculate the ratios in Exhibit 13.5 for which sufficient information is available. Round all calculations to two decimal places.
2. 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 (e. g., accounting policies and decisions), give your choice and the supporting explanation.

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RoyaleCavalir Company Company Balance Sheet Cash Accounts Receivable, Net Inventory Equipment. Net Other Assets Total Assets 55,000 110,000 550,000 140,000 $820,000 25,000 45.000 16.000 25,000 160,000 46,000 $292,000 Current Liabilities Note Payable (long-term Common Stock (par $20) Additional Paid-in Capital Retained Earnings Total Uabilities and Stockholders Equity$820.000 $120,000 15.000 55,000 210.000 4,000 8,000 190,000 480,000 50,000 40,000 Total uabilites and Stockholders Equity Income Statement Sales Revenue Cost of Goods Sold Other Expenses Net Income $292000 800,000 480,000 240,000 80,000 $280,000 150,000 95,000 $35,000 Other Data Per share price at end ofyear Selected Data from Previous Year Accounts Receivable, Net Note Payable (long-term) Equipment, Net Inventory Total Stockholders Equity $ 14.00 11.00 190,000 550,000 95,000 570,000 47.000 14,000 55,000 160,000 38,000 202,000