XXX Ltd is a manufacturer, which was established 30 years ago. It has very good relationships with
Question:
XXX Ltd is a manufacturer, which was established 30 years ago. It has very good relationships with both its clients and suppliers. However, its clients have been badly affected by the economic recession these two years. XXX Ltd. has been asked by its clients to allow longer credit terms, increasing from 8 months to a year. Recently, XXX Ltd. applied for a 1 million 2-year loan from your bank. You are the loan officer and are provided with the following financial ratios. Discuss all the appropriate concerns about the borrowing firm.
Table 1 Financial Ratios of XXX Ltd. | |||||
Time | 2017 | 2018 | 2019 | 2020 | 2021 |
Current Ratio 1 | 2.12 | 1.97 | 2.06 | 1.99 | 1.18 |
Acid Test 1 | 0.84 | 0.96 | 1.20 | 1.38 | 0.80 |
Credit Given (days) | 156.99 | 222.11 | 237.28 | 267.54 | 344.04 |
Credit Taken (days) | 148.80 | 148.28 | 240.77 | 233.76 | 305.08 |
Gross margin | 38.28% | 35.09% | 36.52% | 37.87% | 15.21% |
Net margin | 13.98% | 17.85% | 14.53% | 13.09% | 6.23% |
Interest Cover (times) | 13.50 | 16.22 | 12.60 | 12.20 | 5.67 |
D/E ratio | 33% | 29% | 30% | 31% | 32% |
Net working assets to sales % | 131% | 127% | 130% | 127% | 67% |
Table 2 Financial Ratios in the industry of XXX Ltd. | |||||
2017 | 2018 | 2019 | 2020 | 2021 | |
Current Ratio 1 to | 1.96 | 1.39 | 1.32 | 1.21 | 1.25 |
Acid Test 1 to | 0.8 | 0.89 | 0.92 | 1.01 | 0.96 |
Credit Given (days) | 213.28 | 228.03 | 241.61 | 258.31 | 305.42 |
Credit Taken (days) | 150.43 | 169.65 | 172.98 | 183.76 | 278.65 |
Gross margin | 12.00% | 11.60% | 13.30% | 15.20% | 14.14% |
Net margin | 8.90% | 9.20% | 12.50% | 10.70% | 5.53% |
Interest Cover (times) | 3.52 | 3.65 | 4.02 | 5.21 | 4.8 |
D/E | 35% | 37% | 36% | 39% | 39% |
Net working assets to sales % | 88% | 77% | 56% | 36% | 35% |
Consumer Behavior Building Marketing Strategy
ISBN: 978-0077645557
12th edition
Authors: Delbert Hawkins, David Mothersbaugh