Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2020, for Business Solutions follow.
Total assets
$121,568
Total liabilities
$862
Total equity
$120,706
Required:1. The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.77. As of March 31, 2020, what is the maximum amount that Business Solutions could borrow from this bank?
2. Assume Business Solutions borrows the maximum amount allowed from the bank. (a) What percentage of assets would be financed by debt?(b) What percentage of assets would be financed by equity?
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2020, for Business Solutions follow. Total assets . $120,268 Total liabilities . $875 Total equity $119,393 Required 1. The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.8. As of March 31, 2020, what is the maximum amount that Business Solutions could borrow from this bank? 2. If Business Solutions borrows the maximum amount allowed from the bank, what percentage of assets would be financed (a) by debt and (b) by equity? 3. What are some factors Santana Rey should consider before borrowing the funds?
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2022, for Business Solutions follow.
Total assets
$120,268
Total liabilities
$875
Total equity
$119,393
The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.8. As of March 31, 2022, what is the maximum amount that Business Solutions could borrow from this bank?
Assume Business Solutions borrows the maximum amount allowed from the bank.
What percentage of assets would be financed by debt?
What percentage of assets would be financed by equity?
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- Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2022, for Business Solutions follow. Total assets $121,568 Total liabilities $862 Total equity $120,706 Required:1. The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.77. As of March 31, 2022, what is the maximum amount that Business Solutions could borrow from this bank? (Round your intermediate calculations to the nearest dollar amount.)2. Assume Business Solutions borrows the maximum amount allowed from the bank. (Round your intermediate dollar values to the nearest whole number and final answers to 1 decimal place.)(a) What percentage of assets would be financed by debt?(b) What percentage of assets would be financed by equity?arrow_forwardA customer of a Bank Nizwa wants to know about the accounting treatment of advancing loans to Public by the bank. The branch manager of Bank Nizwa has replied to the customer that the loans provided to public will be recorded under the: a. Debit side of the income statement b. Liability side of the statement of financial position c. Assets side of the statement of financial position d. Credit side of the income statementarrow_forwardYou have been asked by the CFO to analyze a prospective customer who has requested sales on credit. Use the financial statements for TechnoTCL, Inc Download financial statements for TechnoTCL, Inc to calculate the attached ratios and complete the assignment. Prepare a brief presentation (maximum of 4 slides) to the CFO including the calculations and 2-3 sentences interpreting each ratio. Slide One: Calculate and interpret the following debt ratios: debt ratio, debt-equity ratio, and times interest earned for all three years. Slide Two: Analyze one of the debt ratios including why the ratio is used and what the actual results for TechnoTCL might indicate. Slide Three: Calculate and interpret the following profitability ratios: operating profit margin, net profit margin, return on assets, and return on equity for all three years. Slide Four: Analyze one of the profitability ratios including why the ratio is used and what the actual results for TechnoTCL might indicate. echnoTCL,…arrow_forward
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