Current income statement and balance sheet

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Reference no: EM13777575

You are the chief loan officer for Big Bank Inc. Twittergram has presented its current income statement and balance sheet to Big Bank to obtain a loan. On the balance sheet, the company has a current ratio of 2.3 and a quick ratio of 1.7. In addition, you requested a credit report that revealed Twittergram has a good credit history. However, you are concerned because the company has reported a net loss for the year totaling $20,000. The net loss includes an extraordinary loss of $60,000 and a loss on the disposal of a business segment of $50,000. These losses are assumed to be one-time-only losses that will affect the current year financial statements and not future years. Define the current and quick ratios and explain what these ratios tell us about Twittergram’s liquidity. For each loss, determine the section of the income statement in which it would appear and briefly define the criteria for classifying a transaction with each section. Identify advantages and disadvantages of loaning money to Twittergram. Decide whether you would approve the loan.

Reference no: EM13777575

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