LAGER Ltd, a reputable company, listed on the stock exchange, has had the following balance sheets over the last 3 years (expressed in $million).

It is considering investing $25 million in a new fixed asset, and has asked you, its banker, to finance the entirety of this amount by a five years loan.

1. a) Assuming the need to invest $25 million was well founded, would you, from a pure risk perspective, approve the loan? Why and why not? (Justify your analysis with the appropriate financial ratios).

   (12 marks)

2. b) What other factors you would consider in addition to the financial performance in (a) to grant the loan to LAGER Ltd.? Why?
     

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LAGER 2016 2017 2018 2016 2017 2018 Paid up Capital Retained earnings 30 30 Fixed assets 70 98 138 30 30 42 56 Inventory 28 39 55 Long Term debt Account payable Acct receivables 36 50 70 59 84 133 Marketable securities 11 4 7 21 29 41 Cash 1 2 1 Short Term debt 8 11 Total Assets 146 193 271 Total Liabilities 146 193 271 LAGER 2016 2017 2018 2016 2017 2018 Paid up Capital Retained earnings 30 30 Fixed assets 70 98 138 30 30 42 56 Inventory 28 39 55 Long Term debt Account payable Acct receivables 36 50 70 59 84 133 Marketable securities 11 4 7 21 29 41 Cash 1 2 1 Short Term debt 8 11 Total Assets 146 193 271 Total Liabilities 146 193 271

Answer rating: 100% (QA)

Answer a DebttoEquity ratio long term debt shareholders equity Total Debt ratio Total Debt Total Ass... View the full answer