Suppose you work in the loan department of Third National Bank. Byron Blakely, the owner of Byrons
Question:
Suppose you work in the loan department of Third National Bank. Byron Blakely, the owner of Byron’s Beauty Solutions, has come to you seeking a loan for $500,000 to expand operations. He proposes to use accounts receivable as collateral for the loan and has provided you with the following information from the company’s most recent financial statements:
Requirement
1. Analyze the trends of sales, days’ sales outstanding, and cash collections from customers for 2019 and 2018. Would you make the loan to Blakely? Support your decision with facts and figures. Assume there are no write-offs in 2018 and 2019.
2019 2018 2017 (In thousands) Sales (all on account). Cost of goods sold... Gross profit. Other expenses... Net profit or (loss) before taxes... $1,475 $1,001 $902 876 647 605 599 354 297 287 518 253 $ 44 $ 67 81 Accounts receivable . Allowance for doubtful accounts... $ 128 $ 94 $ 107 13 11
Step by Step Answer:
The trend of sales is increasing Days sales in receivables decreas...View the full answer
Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
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