Please help me with question 4-1. All Study Problems are available in MyLab Finance. The x icon indicates problems in Excelformat available in MyLab Finance.MyLab4-1. (Evaluating liquidity) Aylward Inc. currently has $2,145,000 in current assets and LO2$858,000 in current liabilities. The company's managers want to increase the firm'sinventory, which will be financed by a short-term note with the bank. What level ofinventories can the firm carry without its current ratio falling below 2.0?

Current Ratio=Current Liabilities/Current AssetsGiven:Current Assets = $2,145,000Current…

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(Ratio Computation and Analysis; Liquidity) As loan analyst for Utrillo Bank, you have been presented the following information. Check the image for information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.InstructionsWhich 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.
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An employee at Azai Bank seeks to evaluate a transaction using the risk-adjusted return on capital (RAROC) model. The transaction entails extending a loan to an agro-based entity with the following details:- The risk-free rate of return is 7%- Loss given default (LGD) = 51%- Exposure at default (EAD) = ZMW 2.5 million- Probability of default (PD) = 40 basis points The bank's economic capital (EC) model assesses an EC charge for the firm, equivalent to 5% of EAD, amounting to ZMW 100,000. Assuming a RAROC hurdle rate of 15%, the transaction yields a net profit of ZMW 14,000 before other adjustments. Tasks:A. Calculate the bank’s risk-adjusted rate of return on the loan to the agricultural company. B. Additionally, consider the scenario where the bank could have extended a loan of the same amount, generating an identical net profit of ZMW 14,000 before adjustments to a pharmaceutical products manufacturing firm, with an EC of 2.5%. C. Determine which loan the bank should prioritize…
Please answer Fast in typing. I ll upvote Thank You Based on the following information about Banks A and B, compute for each the return on assets (ROA), return on equity (ROE), and leverage ratio. a. Bank A has net profit after taxes of $1.8 million and the following balance sheet: The return on assets (ROA) for Bank A: ___% The return on equity (ROE) for Bank A: ___% The leverage ratio for Bank A: ___ Bank B has net profit after taxes of $1 million and the following balance sheet: Instructions: Enter your responses rounded to two decimal places.) The return on assets (ROA) for Bank B: ___% The return on equity (ROE) for Bank B: ___% The leverage ratio for Bank B: ___
Compute the weighted-average marginal cost of funds for XYZ Bank Limited.B. Explain why it is important to use the marginal cost of funds as opposed to average cost of funds in making loan pricing decisions.
A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the bank will consider a loan. Which of the following actions would INCREASE the ratio? Group of answer choices: Selling some of the existing inventory at cost Using cash to pay off current liabilities Borrowing long-term debt to pay off short-term bank loan Paying off long-term debt. Collecting some of the current accounts receivable
Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions. Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and increase/decrease the capital/ debt/ deposit/ loans/ reserves account. This would also bring the leverage ratio from its initial value of 14/ 14.80/ 16.10/ 18.20 to a new value of 14/ 14.80/ 16.10/ 18.20 Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. The size of the monetary base The total value of liabilities The return on each asset
Jolly Banker is calculating the loan price for a $500,000 operating loan to Kelly business. If approved, this loan will be funded with 35% equity capital, and the remaining funds will come from the bank's debt capital. You have the following information about your bank’s outlays: Administrative costs 0.45% Cost of debt 7.00% Cost of equity 5.00% Probability of loss 0.55% Fees paid by the borrower 1.00% Calculate the weighted average cost of debt for this funding request. (Enter your answer in percentage. Round your answer to 2 decimal places)
(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,912,160,600 and current liabilities of $1,365,829,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal?
You are considering investing in Dakota's Security Services. You have been able to locate the following information on the firm: Total assets are $32.6 million, accounts receivable are $4.46 million, ACP is 25 days, net income is $4.83 million, and debt-to-equity is 1.3 times. All sales are on credit. Dakota's is considering loosening its credit policy such that ACP will increase to 30 days. The change is expected to increase credit sales by 6 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Dakota's profit margin will remain unchanged. How will this change in accounts receivable policy affect Dakota's net income, total asset turnover, equity multiplier, ROA, and ROE? Note: Do not round intermediate calculations. Enter your answer in millions of dollars. Round your answers to 2 decimal places. Use 365 days a year. Net income Total asset turnover Equity multiplier ROA ROE million times times % %
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Snowflake Manufacturing [SM] has recently come to the bank you work for looking for a $280,000 long-term loan. The following data was submitted with SM's loan application: 2020 $475,200 155,400 175,200 408,600 103,500 13,200 34,200 56,100 64,200 2019 $316,500 120,000 2021 $820,800 Current assets.. Current liabilities. Non-current liabilities. Shareholders' equity.. Operating income... Interest expense... Income tax expense.. Net income... 414,600 60,800 303,700 168,900 7,200 65,400 96,300 106,300 300,000 490,200 208,500 28,500 72,000 108,000 115,000 Operating cash flow... The loan committee has asked you to analyze the data using at least three relevant financial ratios and complete a brief trend analysis. They would also like you to briefly discuss any limitations that might exist when completing this type of analysis and what data dashboards can do to help this. Finally, they have asked that your report also contain a recommendation about whether SM's loan request should be approved.…

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