The (partial) summary financial statements of Petro Ltd on December 31, 2018, are as follows: A/P $
Question:
The (partial) summary financial statements of Petro Ltd on December 31, 2018, are as follows:
A/P $ 26,000 Tax/P (current) 30,000 LT-debt 100,000 Total liability (TL) $156,000 C/S $200,000 R/E 40,000 Total equity (TE) $240,000 Let TA = total assets; TL = total liabilities; TE = total equity; leverage ratio (LR) = TA/TE. Petro seeks a short-term loan from a local bank. The bank requires Petro’s leverage ratio to be between 1.75 and 1.90 after the short-term loan is granted. That is, 1.75≤LR≤1.90 after the short-term loan is granted.
Required: Find the maximum and minimum amounts that Petro can borrow from the local bank, given the restriction 1.75≤LR≤1.90.
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas