FINANCIAL ACCT-CONNECT
8th Edition
ISBN: 9781266627903
Author: Wild
Publisher: INTER MCG
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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
$120,568
Total liabilities
$872
Total equity
$119,696
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 0.83. 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?
1. Maximum amount
2. (a) Percentage of assets financed by debt
%
2. (b)…
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?
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 $121,068 Total liabilities $867 Total equity $120, 201
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 0.88. As of March 31, 2020, 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?
1.
2.
2. (b)
(a)
Maximum amount
Percentage of assets financed by debt…
Chapter 9 Solutions
FINANCIAL ACCT-CONNECT
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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 . $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?arrow_forwardRead the instructions below and see the attached balance sheet of moon and star cooperation to support your answer. Moon Corporation and Star Corporation are in the same line of business and both were recently organized, so it may be assumed that the recorded costs for assets are close to current market values. The balance sheets for the two companies are as follows at July 31, 2011: Instructions a. Assume that you are a banker and that each company has applied to you for a 90-day loan of $12,000. Which would you consider to be the more favorable prospect? Explain your answer fully. b. Assume that you are an investor considering purchasing all the capital stock of one or both of the companies. For which business would you be willing to pay the higher price? Do you see any indication of a financial crisis that you might face shortly after buying either company? Explain your answer fully. (For either decision, additional information would be useful, but you are to reach your decision on…arrow_forwardFinancial decisions often place heavier emphasis on one type of financial statement over the others. Consider each of the following hypothetical situations independently. PNC Bank is considering extending a loan to a small company. The company would be required to make interest payments at the end of each year for 5 years, and to repay the loan at the end of the fifth year. Instructions In each of the situations above, state whether the decision-maker would be most likely to place primary emphasis on information provided by the income statement, balance sheet, or statement of cash flows. In each case, provide a brief justification for your choice. Choose only one financial statement in each case.arrow_forward
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