As loan analyst for Murray Bank, you have been given the following information.

Each of these companies has requested a loan of £50,000 for 6 months with no collateral offered. Since your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Instructions

Judging from the information above, which of the two companies 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 ple Herring Ltd. Assets Other assets £ 500,000 £ 612,000 Current assets Inventories 570,000 518,000 Receivables 220,000 302,000 Cash 120,000 320,000 Total current assets 910,000 1,140,000 Total assets £1,410,000 £1,752,000 Equity and Liabilities Share capital and retained earnings £710,000 £ 902,000 Non-current liabilities 400,000 500,000 Current liabilities 300,000 350,000 Total equity and liabilities £1,410,000 £1,752,000 £ 930,000 £1,500,000 30% Annual sales Rate of gross profit on sales 40%