Case

1.
Sun Corp.
Current Liabilities (Notes Payable): $12,400
Liquidity Position: Sun has a good liquidity position, with a cash balance that can cover the loan
without considering other assets or receivables.
Debt-to-Equity Ratio: Low, indicating lower financial risk.
Terra Corp.
Liquidity Position: Terra's cash balance is less than the requested loan amount, and its notes payable
are nearly 4.7 times its cash on hand.
Debt-to-Equity Ratio: Higher than Sun's, implying higher leverage and potential financial risk.
I would consider Sun Corporation to be the more favorable prospect for a loan because of its higher
liquidity and lower short-term liabilities, which imply a lower risk of default.
2.
Terra Corporation has a stronger asset base, with higher values in land, building, and office
equipment. Sun Corporation has better liquidity, which is an important factor for sustainability and
growth. Terra Corporation has higher liabilities, which could be a concern, especially the notes
payable which are due soon.
financial crisis:
Sun Corporation: No immediate indicators of a financial crisis are visible. The company has a
strong cash position and lower liabilities, which provides financial stability.
Terra Corporation: The high level of current liabilities compared to its cash on hand could lead to
a liquidity crisis in the short term, especially if the company cannot convert its accounts receivable
or other assets into cash quickly.
For a higher price, investors might be willing to pay more for Sun Corporation due to its stronger
liquidity position and lower leverage, making it a more stable investment in the short term.
Sun Corporation presents a lower risk, while Terra Corporation offers a potentially higher reward
but with increased risk.