Reference no: EM133674865

Question

Grand Savings Bank has received loan applications from three companies in the plastics manufacturing business and currently has the funds to grant only one of these requests. Specific data, shown below, has been selected from these applications for review and comparison with industry averages: Springfield Reston Valley Industry Total sales (millions) $4.27 $3.91 $4.86 $4.30 Net profit margin 9.55% 9.85% 10.05% 9.65% Current ratio 1.82 2.02 1.96 1.95 Return on assets 12.0% 12.6% 11.4% 12.4% Debt/equity ratio 52.5% 44.6% 49.6% 48.3% Financial leverage 1.30 1.02 1.56 1.33 Based on the information above, select the strategy that should be the most beneficial to Grand Savings: Grand should grant the loan to Valley as the company has the highest net profit margin and degree of financial leverage. Grand should not grant any loans as none of these companies represents a good credit risk. Grand should grant the loan to Reston as both the debt/equity ratio and degree of financial leverage are below the industry average. Grand should grant the loan to Springfield as all the company's data approximate the industry average.