(Ratio Computation and Analysis; Liquidity) As loan analyst for Utrillo Bank, you have been presented the following information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Instructions
Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year.
Toulouse Co. Lautrec Co.
Assets
Cash $120,000 $320,000
Receivables 220,000 302,000
Inventories 570,000 518,000
Total current assets9 10,000 1,140,000
Other assets 500,000 612,000
Total assets $1,410,000 $1,752,000
Liabilities and Stockholders
Current liabilities $301,600 $350,600
Long-term liabilities 404,300 499,300
Capital stock and retained earnings
713,600 904,200
Total liabilities and stockholders' Equity
$1,419,500 $1,754,100
Annual sales $ 931,300 $1,506,700
Rate of gross profit on sales30% 40%

Utrillo Bank

Ratio Computation and Analysis: Liquidity Ratios:

Based on the computed liquidity ratios below, the loan should be advanced to Lautrec Co.  It has better performing liquidity ratios than Toulouse Co.

Explanation:

a) Data and Calculations:

Loan request = $50,000

Period of loan = 6 months with no collateral

Account balances:

                                            Toulouse Co.            Lautrec Co.

Assets

Cash                                      $120,000               $320,000

Receivables                            220,000                 302,000

Inventories                             570,000                  518,000

Total current assets              9 10,000                1,140,000

Other assets                          500,000                 612,000

Total assets                        $1,410,000            $1,752,000

Liabilities and Stockholders

Current liabilities                 $301,600              $350,600

Long-term liabilities              404,300                499,300

Capital stock and

retained earnings                  713,600               904,200

Total liabilities and

stockholders' Equity        $1,419,500            $1,754,100

Annual sales                     $ 931,300           $1,506,700

Rate of gross profit on sales     30%                     40%

Current Ratio = Current assets/Current liabilities

                                           Toulouse Co.      Lautrec Co.

Current Ratio               $910,000/$301,600  $1,140,000/$350,600

=                                              3.02                      3.25

Quick Ratio = (Current assets - Inventory)/Current liabilities

                                           Toulouse Co.      Lautrec Co.

Quick Ratio  $910,000-570,000/$301,600  $1,140,000-518,000/$350,600

=                                              1.13                      1.77

Operating Cash Flow Ratio = Cash/Current liabilities

                                           Toulouse Co.                 Lautrec Co.

Operating Cash Flow Ratio = $120,000/$301,600  $320,000/$350,600

=                                                0.39                                0.91

Days Receivable outstanding = Average receivables/Sales * 365

                                                Toulouse Co.                 Lautrec Co.

Days Receivable Outstanding  $220,000/$931,300 $302,000/$1,506,700

* 365 days

=                                                86 days                           73 days

what is the actual question i have no idea how to answer this w/o a question