Hello Ltd. is a steel producer and has banked with Monash bank for five years. Hello Ltd.
Question:
Hello Ltd. is a steel producer and has banked with Monash bank for five years. Hello Ltd. now applies for a 3-year loan from Monash bank. As a lending officer at Monash bank, you are provided with the following information (Table 1) on the financial ratios of Hello Ltd. Generally, in the steel industry, firms have a policy of giving 80 days' credit and can obtain 3 months of credit from their suppliers.
(a) Is Hello Ltd. facing any risk of under-trading, over-trading, or none of them? Provide the relevant symptoms (if any). (2 marks)
(b) Combining all the relevant ratios in Table 1, what does all the information tell us about the liquidity management of this borrowing firm? List the details.
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe