Question A:Is the company likely to be successful if it approaches its bank FCIB for a loan to undertake a project at a cost of $2.5 million? ARG Inc, is a manufacturer of dairy products that was formed three years ago by three sisters who,as directors, retain sole ownership of its ordinary share capital. One third of the initial share capitalwas provided by each sister. However, the company has managed to return a profit in each year ofoperation as shown in the financial statements.ARG Inc. has an overdraft limit of $3.2 million and pays interest on its overdraft at a rate of 6 percent(6%) per year. The company currently has no long-term debt. Current liabilities consist of tradecreditors and overdraft finance in each of the three years as follows:YearOverdraft ($'000)Trade creditors ($'000)201720182019505671,1674007331,133Interest??The industry averages for firms similar to ARG Inc. areNetProfit 9%Creditor days70 daysMarginInterest cover15 timesCurrent ratio2.1 timesStock daysDebtor days85 daysQuick ratio0.8 times75 daysDEBT/Equity ratio40% (using Book value) ARG INCIncome Statement for the years ending December 31201920182017(S'000)(S'000)(S'000)Revenue5,20034002600Cost of Goods sold457028062104Profit before interest & tax630594496Interest70343Earnings before tax560560493Тах140140123Net Income420420370Dividends202020Retained profit400400350ARG IncBalance Sheet as at December 31201920182017(S'000)(S'000)(S'000)Fixed Assets1,6001,200800Current AssetsInventoryAccounts Receivable6001,4501,4001,0008504002,8501,8501,000Total Assets4,4503,0501,800Current Liabilities2,3001,300450Ordinary shares1,0001,0007501,000Reserves1,150350Total Liabilities & Owners Equity4,4503,0501,800

Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and…

Answered: Question A: Is the company likely to…

Question A: Is the company likely to be successful if it approaches its bank FCIB for a loan to undertake a project at a cost of $2.5 million?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter19: Corporations: Distributions Not In Complete Liquidation

Section: Chapter Questions

Problem 20DQ

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