Simone Smith, Trading as Scents of Jamaica, is applying for a small business loan. She provides the bank with the following information: cash in checking account $5000, short-term investment $10,350, real estate with market value of 115,500, inventories 30,000, first mortgage on real estate 25000, home equity loan limit 70000, balance on home equity loan 10,000, value of home 200,000, automobile with market value of 19,000, automobile loan outstanding 15,000, credit card debt 1500. (A) using the information provided, construct a statement of Affairs [personal balance sheet] for Simon Smith, trading as Scents of Jamaica. The statement should be arranged to show the assets and liabilities in their various categories, for example current assets being a category. (B) The bank’s policy says that a debit ratio of 20% or less is acceptable for a small business loans . Using the debt ratio as the sole criterion , would you make a loan of (100000)hundred thousand dollars to Scents of Jamaica? Show all working to support your answer. (C) when firms enter into loan agreements with their banks it is very common to have a covenant that places restrictions on the medium current ratio of the firm. Consider the situation of Lyle’s Auto parts. The firm has $1,807,626 in current assets and $1,364,994 in current liability. If the firm wants to expand its investment in inventory and finance the expansion by increasing account payable, how much could they increase their invention without reducing the current ratio below 1.2 times?
Simone Smith, Trading as Scents of Jamaica, is applying for a small business loan. She provides the bank with the following information: cash in checking account $5000, short-term investment $10,350, real estate with market value of 115,500, inventories 30,000, first mortgage on real estate 25000, home equity loan limit 70000, balance on home equity loan 10,000, value of home 200,000, automobile with market value of 19,000, automobile loan outstanding 15,000, credit card debt 1500.
(A) using the information provided, construct a statement of Affairs [personal balance sheet] for Simon Smith, trading as Scents of Jamaica. The statement should be arranged to show the assets and liabilities in their various categories, for example current assets being a category.
(B) The bank’s policy says that a debit ratio of 20% or less is acceptable for a small business loans . Using the debt ratio as the sole criterion , would you make a loan of (100000)hundred thousand dollars to Scents of Jamaica? Show all working to support your answer.
(C) when firms enter into loan agreements with their banks it is very common to have a covenant that places restrictions on the medium
If the firm wants to expand its investment in inventory and finance the expansion by increasing account payable, how much could they increase their invention without reducing the current ratio below 1.2 times?
Step by step
Solved in 4 steps
