The financial statements for Royale and Cavalier

companies are summarized #2863

The financial statements for Royale and Cavalier companies are summarized here:These two
companies are in the same business and state but different cities. Each company has been in
operation for about 10 years. Both companies received an unqualified audit opinion on the
financial statements. Royale Company wants to borrow $ 75,000 cash and Cavalier Company is
asking for $ 30,000. The loans will be for a two- year period. Both companies estimate bad
debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates
than Royale. Neither company issued stock in the current year. Assume the end- of- year total
assets and net equipment balances approximate the year’s average and all sales are on
account.Required:1. Calculate the ratios in Exhibit 13.5 for which sufficient information is
available. Round all calculations to two decimal places.2. Assume that you work in the loan
department of a local bank. You have been asked to analyze the situation and recommend
which loan is preferable. Based on the data given, your analysis prepared in requirement 1, and
any other information (e. g., accounting policies and decisions), give your choice and the
supporting explanation.View Solution:
The financial statements for Royale and Cavalier companies are summarized

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