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Question: You have just been employed at a Junior Analyst at a bank and as your first assignment you have been asked to analyze the financial statements of a small tree cutting business which has applied for a $100,000 loan to purchase additional equipment to expand its operations.
Should the bank lend the company the funds? Support your recommendation with calculations. What other analysis should you undertake in order to support your recommendation?
Balance Sheet
2021
2022
Current Assets
Cash
15,450
30,900
Inventory
40,350
55,000
Accounts Receivables
30,950
35,750
Prepaid Insurance
575
275
Total Current Assets
87,325
121,925
Long Lived Assets
Property Plant & Equipment
177,000
183,000
Total Assets
264,325
304,925
Liabilities & Owners' Equity
Current Liabilities
Accounts Payable
15,500
14,000
Salaries Payable
2,250
2,000
Interest Payable
525
Unearned Revenue
2,600
1,600
Short term notes
6,000
5,000
Total Current Liabilities
26,875
23,125
Long Term Liabilities
Notes Payable
43,000
33,000
Total Liabilities
69,875
56,125
Owner's Equity
194,450
248,800
Total Liab & Owners Equity
Income Statement
Sales
200,000
250,000
Cost of Goods Sold
70,000
87,500
Gross profit
130,000
162,500
Salaries & Wages
50,000
Depreciation
7,000
Insurance
5,500
Advertising Expenses
4,000
Interest Expense
2,200
Income before taxes
62,000
87,800
Income tax
21,950
Net Profit
46,500
65,850
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