Comment on your findings from part I from ratios above. Based on your analysis in parts, do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Explain your reasoning.
Natalie and Curtis have comparative balance sheets and income statements for Cookie & Coffee Creations Inc. They have been told that they can use these financial statements to prepare horizontal and vertical analyses, to calculate financial ratios, to analyze how their business is doing, and to make some decisions they have been considering.
COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, 2024
Assets Current assets Cash Accounts receivable Inventory Prepaid expenses Property, plant, and equipment Furniture and fixtures Accumulated depreciation--furniture and fixtures Computer equipment Accumulated depreciation-computer equipment Kitchen equipment Accumulated depreciation--kitchen equipment Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Income tax payable Dividends payable Salaries and wages payable Interest payable Note payable-current portion Long-term liabilities Note payable-long-term portion Total liabilities Stockholders' equity Paid-in capital Preferred stock, 2,500 shares issued and outstanding Common stock, 25,930 shares issued, 25,800 outstanding Retained earnings Total paid-in capital and retained earnings Less: Treasury stock (750 common shares) Total stockholders' equity Total liabilities and stockholders equity
The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2024, are in the attached file. Problem II Chapter 13.docx Additional information:
$86,219 3,250 17,897 6,300
$113,666
Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more kitchen equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance.
$12,500 (1,250) 4,200 (600) 29,000 (2,050)
11,250
Instructions
3,600
1. Calculate the following ratios (use ending balances in place of averages, where necessary, and round all calculations to the nearest tenth): 2. current ratio 3. accounts receivable turnover 4. inventory turnover 5. debt to assets 6. times interest earned 7. gross profit rate 8. profit margin 9. asset turnover 10. return on assets 11. return on common stockholders' equity
26,950 41,800 $155,466
$5,848 19,690 700 2,250 188 4,000 $32,676
6,000 38,676
Comment on your findings from part I from ratios above
1. Based on your analysis in parts, do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Explain your reasoning.
$14,000 25,930
39,930 77,360 117,290 500
116,790 $155,466
COOKIE & COFFEE CREATIONS INC Income Statement Year Ended October 31, 2024 Sales revenue $462,500 Cost of goods sold 231,250 Gross profit 231,250 Operating expenses Salaries and wages expense $92,500 Depreciation expense 3,900 Other operating expenses 35,987 132,387 Income from operations 98,863 Other expenses Interest expense 413 Income before income tax 98,450 Income tax expense 19,690 Net income $78,760
