PA13-6 (Algo) Using Ratios to Compare Loan Requests from Two Companies [LO 13-4, LO 13-5, LO 13-6] The financial stateme

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Pa13 6 Algo Using Ratios To Compare Loan Requests From Two Companies Lo 13 4 Lo 13 5 Lo 13 6 The Financial Stateme 1 (38.57 KiB) Viewed 57 times

Pa13 6 Algo Using Ratios To Compare Loan Requests From Two Companies Lo 13 4 Lo 13 5 Lo 13 6 The Financial Stateme 2 (47.18 KiB) Viewed 57 times

PA13-6 (Algo) Using Ratios to Compare Loan Requests from Two Companies [LO 13-4, LO 13-5, LO 13-6] The financial statements for Royale and Cavalier companies are summarized here: Royale Company Cavalier Company Balance Sheet Cashi Accounts Receivable, Net $ 27,000 57,000 114,000 Inventory Equipment, Net 554,000 Other Assets 142,000 Total Assets $ 894,000 Current Liabilities $ 124,000 Notes Payable (long-term) 194,000 Common Stock (par $20) 482,000 Additional Paid-In Capital Retained Earnings 52,000 42,000 Total Liabilities and Stockholders' Equity $894,000 Income Statement Sales Revenue $ 806,000 Cost of Goods Sold Other Expenses 482,000 242,000 $82,000 Net Income Other Data Per share price at end of year $ 20.00 Selected Data from Previous Year Accounts Receivable, Net $ 49,000 Notes Payable (long-term) Equipment, Net 194,000. 554,000 Inventory 97,000 Total Stockholders' Equity 576,000 $ 47,000 18,000 29,000 164,000 48,000 $ 306,000 $ 19,000 59,000 212,000 6,000 10,000 $ 306,000. $286,000 152,000. 97,000 $ 37,000 $ 16.00 $ 16,000 59,000 164,000 40,000 228,000
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 $77,000 cash and Cavalier Company is asking for $32,000. 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 following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.) Ratio Royale Company Cavaller Company Tests of Profitability: 1. Net Profit Margin % 2. Gross Profit Percentage % 3. Fixed Asset Turnover 4. Return on Equity 5. Earnings per Share 6, Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover 7. Days to Collect 8. Inventory Turnover 8. Days to Sell 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets % % % %