Financial Homework Help

example1.xlsx

Problem

	You are a young loan officer working for Goose River Bank in Mayville, ND.
	Your boss, Mr. Jefferson, has handed you the file of a new customer for the bank, Mayville Motors Inc.
	They are looking for a loan of $350,000 to expand their business and add a dealership in Hatton, ND.
	Enclosed you will find the income statement and balance sheet for Mayville Motors for the past 3 years.
	Conduct the necessary ratio analysis in order to determine whether to grant them a loan.
	After conducting the analysis, write a memo to Mr. Jefferson detailing your decision.
	Be sure to backup your decision using your ratios and industry averages.

	2009	2010	2011
Sales Revenue	1,900,000	1,700,000	1,600,000
COGS	1,000,000	1,100,000	1,150,000
Gross Profit	900,000	600,000	450,000
Operating Expenses:
Selling	300,000	257,000	241,000
General & Admin.	100,000	69,000	72,000
Leases	40,000	25,000	30,000
Depreciation	30,000	35,000	40,000
Total Operating Expenses	470,000	386,000	383,000
Earnings Before Interest and Taxes	430,000	214,000	67,000
Interest Expense	24,000	29,000	34,000
Net Profit Before Taxes	406,000	185,000	33,000
Taxes (35%)	142,100	64,750	11,550
Net Profit After Taxes	263,900	120,250	21,450

Current Assets:				2009	2010	2011
	Cash			$135,000	$104,365	$85,650
	Accounts Receivable			111,250	192,005	212,410
	Inventories			98,850	157,330	175,830
		Total Current Assets		$345,100	$453,700	$473,890
Property, Plant and Equipment				$778,150	$930,000	$1,054,000
Less Accumulated Depreciation				170,000	205,000	245,000
Net Property, Plant and Equipment				$608,150	$725,000	$809,000
Total Assets				$953,250	$1,178,700	$1,282,890
Current Liabilities:
	Accounts Payable			$ 82,350	$ 103,550	$ 122,390
	Accrued Expenses			37,000	54,000	64,300
	Short Term Notes Payable			19,000	31,000	38,100
	Current Portion On Long-term Debt			28,000	43,000	54,500
		Total Current Liabilities		$ 166,350	$ 231,550	$ 279,290
Long-term Debt:
	Net Long-term Debt			80,000	120,000	155,000
Total Liabilities				$ 246,350	$ 351,550	$ 434,290
Stockholders' Equity
	Paid-in Capital:
		Common Stock (75,000 shares @ $1 per share)		$75,000	$75,000	$75,000
		Additional Paid In Excess of Par		300,000	300,000	300,000
			Total Paid-in Capital	$375,000	$375,000	$375,000
	Retained Earnings			331,900	452,150	473,600
		Total Stockholders' Equity		$706,900	$827,150	$848,600
Total Liabilities and Stockholders' Equity				$ 953,250	$ 1,178,700	$ 1,282,890

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