As loan analyst for Madison Bank, you have been presented the following information

E24-4 (Ratio Computation and Analysis; Liquidity) As loan analyst for Madison Bank, you have been presented the following information.

Plunkett Co. Herring Co.
Assets
Cash $ 120,000 $ 320,000
Receivables 220,000 302,000
Inventories 570,000 518,000
Total current assets 910,000 1,140,000
Other assets 500,000 612,000
Total assets $1,410,000 $1,752,000

Liabilities and Stockholders’ Equity
Current liabilities $ 300,000 $ 350,000
Long-term liabilities 400,000 500,000
Capital stock and retained earnings 710,000 902,000
Total liabilities and stockholders’ equity $1,410,000 $1,752,000

Annual sales $ 930,000 $1,500,000
Rate of gross profit on sales 30% 40%

Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Inasmuch as your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Instructions
Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year.

Click here for the solution: As loan analyst for Madison Bank, you have been presented the following information

An analyst predicted last year that the stock of Logistics, Inc., would offer a total return of at least 10% in the coming year

E8–1 An analyst predicted last year that the stock of Logistics, Inc., would offer a total return of at least 10% in the coming year. At the beginning of the year, the firm had a stock market value of $10 million. At the end of the year, it had a market value of $12 million even though it experienced a loss, or negative net income, of $2.5 million. Did the analyst’s prediction prove correct? Explain using the values for total annual return.

Click here for the solution: An analyst predicted last year that the stock of Logistics, Inc., would offer a total return of at least 10% in the coming year

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.34 percent, the 30-year Treasury bond rate is 7.33 percent, and the inflation rate is 2.78 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate.

Click here for the solution: (Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question