2020 annual report for Cisco

	Ratios	2019	Workings	2020	Workings	Formulae
a	Net profit margin	22.4%	11621/51904	22.7%	11214/49301	net income/net sales
b	Return on assets	11.9%	11621/97793	11.8%	11214/94853	net income/total asset
c	Return on equity	30.6%	11621/37920	33.4%	11214/33571	net income/equity
d	Current ratio	1.51	47755/31712	1.72	43573/25331	current assets/current liabilities
It is	Quick ratio	1.46	(47755-1383)/31712	1.67	(43573-1282)/25331	(current assets-inventory)/current liabilities
f	Days in inventory	26 days	365 days/13.91	26 days	365 days/13.74	365days/inventory turnover ratio
g	Days in receivables	39 days	(5491/51904)*365days	41 days	(5472/49301)*365days	(Account receivable/revenue)*365days
h	Days in payables	39 days	(2059/19238)*365days	46 days	(2218/17618)*365days	(Account payable/cost of sales)*365 days
i	Cash conversion cycle	26 days	26+39-39	21 days	26+41-46	f+g-h
j	Liabilities to assets ratio	0.66	64222/97793	0.6	56933/94853	total liabilites/total assets
k	Interest coverage ratio	15.55	14219/859	23.28	13620/585	EBIT/interest expenses

Assume that you work in the corporate credit(loans) department of a bank. The company would like to borrow$1000 million for a period of 5-years from your bank. Based on the ratios in part A and analysis of financial performance of the company, will you extend a loan of $1000 million to the company? Briefly consider the effect of approving the loan on the company's (i) liabilities to assets ratio (ii) interest coverage ratio state your assumptions where appropriate

Answer rating: 100% (QA)

Based on the provided financial ratios and a conservative lending approach approving a 1 billion loan to Cisco for 5 years would likely be approved bu... View the full answer