Assume you are a bank loan officer working for Bank of Montreal (BOM) for many years. Most
Question:
Assume you are a bank loan officer working for Bank of Montreal (BOM) for many years. Most of your clients are well known and reputable but just recently you have been approached by two new prospective clients Rich Corporation and Big Corporation for a large loan. In order to mitigate risks and make a reasonable decision, you asked both prospective clients to provide their statement of financial position (balance sheet) for 2021. Based on only balance sheet, your decision will be made by end of next week.
Rich Corporation Statement of Financial Position December 31, 2021 (in thousands) | |||
Assets | Liabilities | ||
Cash | $11,000 | Accounts Payable | $13,000 |
Accounts Receivable | 4,000 | Notes Payable due 2024 | 377,000 |
Furniture | 36,000 | Total liabilities | $390,000 |
Software | 79,000 | ||
Computers | 300,000 | Shareholders’ Equity | |
Shareholders’ equity | $40,000 | ||
Total liabilities and | |||
Total assets | $430,000 | shareholders’ equity | $430,000 |
Big Corporation Statement of Financial Position December 31, 2021 (in thousands) | |||
Assets | Liabilities | ||
Cash | $9,000 | Accounts Payable | $12,000 |
Accounts Receivable | 24,000 | Loan Payable due 2024 | 28,000 |
Merchandise inventory | 85,000 | Total liabilities | $40,000 |
Furniture | 9,000 | ||
Building | 82,000 | Shareholders’ Equity | |
Land | 14,000 | Shareholders’ equity | $183,000 |
Total liabilities and | |||
Total assets | $223,000 | shareholders’ equity | $223,000 |
1. To which company would you be more comfortable lending money? Explain fully, linking to specific financial statement items and amounts from the respective balance sheets. Use financial ratios and other financial statement analysis tools that will increase your comfort level in your decision-making process.
Operations Management Managing Global Supply Chains
ISBN: 978-1506302935
1st edition
Authors: Ray R. Venkataraman, Jeffrey K. Pinto