Credit Analysis The two companies on the following pages have come to your bank to borrow money. In a short memo to your boss (one page, 12-point Times New Roman

font, double-spaced), discuss whether you would lend money to either or both companies. You will not be graded on your recommendation itself, but on the reasons for your recommendation, so you probably should submit an excel worksheet showing any calculations or computations you did to arrive at your recommendation. Assets Current Assets Cash Marketable Securities Accounts Receivable less: Allowance for Doubtful Accounts Inventory Total Current Assets Property, Plant & Equipment Land Plant less: Accumulated Depreciation Equipment less: Accumulated Depreciation Total Property, Plant & Equipment Total Assets Liabilities & Stockholders Equity Current Liabilities Accounts Payable Notes Payable Total Current Liabilities Long-Term Liabilities Bonds Payable less: Discount on Bonds Payable Stockholders Equity Preferred Stock-5% Dividend Common Stock-1000 shares $10 par value Retained Earnings Total Liabilities & Stockholders Equity ABC CORPORATION BALANCE SHEET 12/31/x5 7000 500 17500 3500 28000 11000 23000 2000 1000 5000 6500 6510 12000 14000 17000 8000 13000 4000 10000 6010 19,010 43,000 62,010 21,000 21,000 20,010 62,010 Sales less: Cost of Goods Sold Gross Margin Operating Expenses Depreciation Salaries Rent Utilities Uncollectible Accounts Total Operating Expenses Operating Income Non-Operating Expenses Interest Net Income ABC CORPORATION INCOME STATEMENT FOR THE YEAR ENDED 12/31/x5 47,000 32,990 2,550 1,500 1,300 1,200 500 14,010 7,050 6,960 3,000 3,960 Other information: The Allowance for Doubtful Accounts was Computed As Follows Amount 5,000 1,000 750 250 1-30 days overdue 31-60 days overdue 61 days & over Inventory was computed as follows: Beginning Inventory at FIFO Purchases 2/1 4/7 6/9 9/3 11/6 12/1 Cost of Goods Available for Sale Ending Inventory (270 units) Age not yet due Ending Inventory per balance sheet Cost of Goods Sold Depreciation was computed as follows: Plant % 230 units @20 350@20 300@21 250@22 300@22 250@23 150@25 150 @ 25 120 @ 23 - Straight Line Depreciation -Estimated Life 50 years -No Salvage Value -$350 depreciation per year - 17,500/50 1 10 30 50 Estimated Uncollectible Equipment -Straight Line Depreciation -Estimated Life 10 years -Estimated Salvage Value $6000 -$2200 depreciation per year - (28,000-6000)/10 50 100 225 125 $4600 7000 6300 5500 6600 5750 3750 39500 3750 2760 $6510 $32990 Assets Current Assets Cash Marketable Securities Accounts Receivable less: Allowance for Doubtful Accounts Inventory Total Current Assets Property, Plant & Equipment Land Plant less: Accumulated Depreciation Equipment less: Accumulated Depreciation Total Property, Plant & Equipment Total Assets Liabilities & Stockholders Equity Current Liabilities Accounts Payable Notes Payable Total Current Liabilities Long-Term Liabilities Bonds Payable less: Discount on Bonds Payable Stockholders Equity Preferred Stock-5% Dividend Common Stock-1000 shares $10 par value Retained Earnings Total Liabilities & Stockholders Equity XYZ CORPORATION BALANCE SHEET 12/31/x5 7000 705 17500 4000 28000 25000 23000 2000 1000 5000 6295 4940 12000 13500 3000 8000 13000 4000 10000 -10265 17,235 28,500 45,735 21,000 21,000 3,735 45,735