Ratio Analysis

User Generated

qznefu14

Business Finance

Description

Scenario: You are a loan officer for White Sands Bank of Taos. Paul Jason, president of P. Jason Corporation, has just left your office. He is interested in an 8-year loan to expand the company's operations. The borrowed funds would be used to purchase new equipment. As evidence of the company's debt-worthiness, Jason provided you with the following facts:

20172016
Current Ratio3.12.1
Asset Turnover2.8 2.2
Net IncomeUp 32%Down 8%
Earnings per Share$3.30$2.50

Jason is a very insistent (some would say pushy) man. When you told him you would need additional information before making your decision, he acted offended and said, "What more could you possibly want to know?" You responded you would , at minimum, need complete, audited financial statements.

Develop a minimum 700-word examination of the financial statements and include the following:

  • Explain why you would want the financial statements to be audited.
  • Discuss the implications of the ratios provided for the lending decision you are to make. That is, does the information paint a favorable picture? Are these ratios relevant to the decision? State why or why not.
  • Evaluate trends in the performance of P. Jason Corporation. Identify each performance measure as favorable or unfavorable and explain the significance of each.
  • List three other ratios you would want to calculate for P. Jason Corporation, and in your own words explain in detail why you would use each.
  • As the loan officer, what else would you do to gain a better understanding of Paul Jason's, and the Corporation's financial picture and why?
  • Based on your analysis of P. Jason Corporation, will you recommend approval for the requested loan? Provide specific details to support your decision.

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

please find the attached file. always a pleasure working with you again. good bye

Running head: RATIO ANALYSIS

1

Ratio Analysis
Name
Tutor
Institution
Course
Date

RATIO ANALYSIS

2
Why the Financial Statements should be audited

Before the bank extends the loan to P. Jason Corporation, reviewing financial statements
such as the balance sheet, income statement, and the cash flow would be necessary in order to
establish the company’s ability to repay the loan in time and in full. Audited financial statements
provide more reliable information, and since the company will be putting its funds at risk with P.
Jason Corporation, White Sands Bank has a right to require externally audited statements which
will satisfy the question on reliability of the information provided. Since auditors provide an
independent report on whether financial statements conform to the set accounting principles,
their opinion is important before relying on the financial statements to make the loaning
decision, especially because they p...


Anonymous
Nice! Really impressed with the quality.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags