Z-Score Model Exercise: The following financial information was provided by ABC in its application for a loan
Question:
Z-Score Model Exercise: The following financial information was provided by ABC in its application for a loan (info. in US $000's).
Cash | $ 20 | Accounts payable | $ 30 |
Accounts receivable | $ 90 | Loans to Accounts Payable | $ 90 |
Inventories | $ 90 | Accumulated (“Accruals”) | $ 30 |
Long term debt | $150 | ||
Plant & Equipment | $500 | Capital (Ret. Profit = $0) | $400 |
TOTAL Assets | $700 | TOTAL Liabilities and Capital | $700 |
Also, the following information is relevant:
Sales = $500,000
Cost of goods sold = $360,000
Taxes = $56,000
Interest payments = $40,000
Net Income = $44,000
Dividends = 50%
Capital Market Value = Book Value…
Using the above information, answer the following questions:
1.- If ABC's Sales were $300,000, the market value of its principal only half of its book value and Cost of goods sold, interest payments and the tax rate remain the same, what would ABC's net profit be? You can assume that the tax credit could be used to lower tax payments in other divisions of the company. Would this change your decision to grant or not credit?
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward