Ratio Computation and Analysis; Liquidity) as loan analyst for Madison Bank, you have been presented the following information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Inasmuch as your bank has reached its quota for loans of this type, only one of these requests is to be granted. Which 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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Plunkett Co. Herring Co. Assets $ 120,000 220,000 570.000 $ 320,000 Cash Receivables 302,000 Inventories 518,000 Total current assets 910,000 1,140,000 Other assets 500.000 612.000 $1,752,000 $1,410,000 Total assets Liabilities and Stockholders' Equity $ 350,000 500,000 902,000 $ 300,000 400,000 710,000 $1.410,000 $ 930,000 Current liabilities Long-term liabilities Capital stock and retained earnings Total liabilities and stockholders' equity $1,752,000 $1,500,000 Annual sales Rate of gross profit on sales 30% 40%