Question: 20 marks

UTOPIA BANK HAS BEEN APPROACHED BY TWO CUSTOMERS FOR A SHORT TERM LOAN OF $ 3,000 MILLION
THE FOLLOWING SUMMARISED FINANCIAL INFORMATION IS AVAILABLE FRON THE LATEST FINANCIAL ST

ALPHA CORP BETA CORP

$ MILLIONS $ MILLIONS THE BANK INTENDS TO ACCEPT ON OF T
NET SALES 72,800 65,000 REQUIRED ; WHICH CUSTOMER’S LOAN
GROSS PROFIT MARGIN 24,020 19,500 WHAT ADDITIONAL INFORMATION MAY
INTEREST EXPENSE 1,200 700 ASSUME THAT THE YEAR END ACCOUNT
INCOME TAX 6,500 5,000
PROFIT AFTER TAX 7,000 4,500
INVENTORIES 9,000 3,500
DEBTORS 4,000 2,200
CASH 900 1,200
CURRENT LIABILITIES 16,680 7,200
LONG TERM LIABILITIES 19,000 11,000
SHARE HOLDERS’ EQUITY 21,000 22,000
Debt to Equity ration 0.4498714653 0.88353414
 AN OF $ 3,000 MILLION.
LATEST FINANCIAL STATEMENTS.

DS TO ACCEPT ON OF THE TWO LOAN REQUESTS.

CH CUSTOMER’S LOAN REQUEST SHOULD BE ACCEPTED ? WHY ?
AL INFORMATION MAY BE USEFUL IN MAKING A DECISION ?
HE YEAR END ACCOUNT BALANCES ARE REPRESENTATIVE OF THE WHOLE YEAR.