Aspero, Inc., has sales of approximately $500,000 per year. Aspero requires a short-term loan of $100,000 to finance its working capital requirements. Two banks are considering Aspero's loan request but each bank requires certain minimum conditions be satisfied. Bank America requires at least a 25% gross margin on sales, and Bank Boston requires a 2:1 current ratio. The following information is available for Aspero for the current year: Sales returns and allowances are 10% of sales. • Purchases returns and allowances are 2% of purchases. • Sales discounts are 2% of sales. • Purchase discounts are 1% of purchases. • Ending inventory is $138,000. . Cash is 10% of accounts receivable. • Credit terms to Aspero's customers are 45 days. • Credit terms Aspero receives from its suppliers are 90 days. • Purchases for the year are $400,000. • Ending inventory is 38% greater than beginning inventory. • Accounts payable are the only current liability. Required: Assess whether Aspero, Inc., meets the credit constraint for a loan from either or both banks. Show computations.

Aspero, Inc., has sales of approximately $500,000 per year. Aspero requires a short-term loan of $100,000 to finance its working capital requirements. Two banks are considering Aspero's loan request but each bank requires certain minimum conditions be satisfied. Bank America requires at least a 25% gross margin on sales, and Bank Boston requires a 2:1 current ratio. The following information is available for Aspero for the current year: Sales returns and allowances are 10% of sales. • Purchases returns and allowances are 2% of purchases. • Sales discounts are 2% of sales. • Purchase discounts are 1% of purchases. • Ending inventory is $138,000. . Cash is 10% of accounts receivable. • Credit terms to Aspero's customers are 45 days. • Credit terms Aspero receives from its suppliers are 90 days. • Purchases for the year are $400,000. • Ending inventory is 38% greater than beginning inventory. • Accounts payable are the only current liability. Required: Assess whether Aspero, Inc., meets the credit constraint for a loan from either or both banks. Show computations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Discuss how the three primary credit bureaus (Equifax, Experian & TransUnion) differ in credit scoring? Discuss the credit scoring of FICO. Compare the credit scoring of the three primary credit bureaus with the credit scoring of FICO. Based on the comparison of credit scoring, which you think is better and why? Please justify.
The credit bureau score model of credit scoring examines: Group of answer choices D. In-house data collected A. Credit card data collected from several banks B. Applicant profile C. FICO scores
match the correct term for each of the following descriptions. Descriptions Terms Examples of these instruments include trade credit, accruals, short-term bank loans, and commercial paper. Accruals A document that provides evidence of the existence of a debt, and specifies the terms of the loan transaction. Blanket lien The cost of accounts payable paid before the expiration of the discount period. Commercial paper This financial instrument uses a borrowing firm’s entire inventory of low-priced, fast selling, and fungible products to secure a short-term loan, and allows the borrower to sell items from inventory without the lender’s permission. Commitment fee A fee charged by a financial institution providing a guaranteed, or revolving, line of credit, on the unused balance of a revolving line of credit. Discount interest loan A form of unsecured short-term financing used by large, extremely creditworthy business organizations. Factoring A financial…
I need the answer as soon as possible
Discuss how the three primary credit bureaus (Equifax, Experian & TransUnion) differ in credit scoring? Discuss the credit scoring of FICO. Compare the credit scoring of the three primary credit bureaus with the credit scoring of FICO. Based on the comparison of credit scoring, which you think is better and why? (There is no number of words required, but I want a clear reasoning/justification of your answer.
discuss the process of applying for a business loan.
In which of the following ways do Fedwire payments differ from ACH payments? 1. Fedwire payments are always credit push. 2. Fedwire is an electronic payment method. 3. Fedwire payments typically cost the payer more to send. Give typing answer with explanation and conclusion
Give a detailed answer to the theoretical question: Display graphically the mechanism of settlements by cheques.
Loan Servicing Companies.. O Collects monthly payments, remits to investor O Purchase loans on the secondary market O Decide on credit criteria for new loans O Underwrite home loans
How do you create a loan in Quickbooks? A. Select Banking > Create Loan B. Use the loan manager C. Create the loan account D. Create a liability account