Answer: I would think liquidity ratios, cash flow, days in receivables, and inventory turns might be a part of their

interests. Lender will check following 1. Leverage (TOL/TNW & TD/TNW) - irrespective of the tenor/type of loan 2. Liquidity Ratio 3. Liquidity Ratios ( current Ratio, inventory turnover ratio, debtors & creditors turnover ratio) 4. Net Working capital - to assess working capital requirement 5. ISCR- Interest service coverage ratio to check capacity to repay interest (in case of CCor OD) 5 DSCR - Debt Service coverage ratio to check capacity to repay interest+ capital (in case of term loan)

Read more: http://wiki.answers.com/Q/What_ratios_are_shortterm_lenders_interested_in#ixzz25NmwdUBG

Review Questions 1. Using the modified DuPont formula allows the analyst to break Dana Dairy Productsreturn on equity into 3 components: the net profit margin, the total asset turnover, and ameasure of leverage (the financial leverage multiplier). Which of the followingmathematical expressions represents the modified DuPont formula relative to DanaDairy Products 2002 performance? (See Figure 2-8.)a. 5.6 (ROE) = 2.5 (ROA) x 2.24 (Financial leverage multiplier)b. 5.6 (ROE) = 3.3 (ROA) x 1.70 (Financial leverage multiplier)c. 4.0 (ROE) = 2.0 (ROA) x 2.00 (Financial leverage multiplier)d. 2.5 (ROE) = 5.6 (ROA) x 0.44 (Financial leverage multiplier) Dana Dairy Products, Income Statement Income Statement Dana Dairy Products For the Year Ended December 31, 2007 Sales Revenue $100,000Less: Cost of Goods Sold 87,000 Gross Profits $13,000Less: Operating Expenses 11,000 Operating Profits $2,000Less: Interest Expense 500Net Profits Before Taxes $1,500Less: Taxes (40%) 600Net Profits After Taxes $900 Dana Dairy Products, Balance Sheet Balance SheetDana Dairy ProductsDecember 31, 2002 Assets Cash $1000Accounts receivable 8900Inventories 4350Total Current Assets 14250Gross Fixed assets $35000Less Accumulated Depreciation 13250Net Fixed Assets 21750Total assets $36000 Liabilities & Stockholders Equity Accounts Payable $9000Accruals 6675Total Current Liabilities 15675Long term debts 4125Total liabilities $19800 $19800Common Stock 1000Retained Earning 15200Total Stockholders Equity 16500 16200Total Liabilities and Stockholders equity $360002. A firm has just ended the calendar year making a sale in the amount of $150,000 of merchandise purchased during the year at a total cost of $112,500. Although the firmpaid in full for the

merchandise during the year, it has yet to collect at year end fromthe customer. The net profit and cash flow for the year area. $0 and $150,000 respectively.b. $37,500 and -$150,000 respectively.c. $37,500 and -$112,500 respectively.d. $150,000 and $112,500 respectively. The most common cash disbursements area. dividend income, cash sales, and accounts payable.b. cash purchases, dividends, and interest income.c. cash purchases, dividends, and accounts payable.d. cash sales, rent, and accounts payable.4. Under the judgmental approach for developing a pro forma balance sheet, the plugfigure required to bring the statement into balance may be called thea. cash balance.b. external financing required.c. retained earnings.d. accounts receivable.5. A weakness of the per cent-of-sales method to preparing a pro forma incomestatement isa. the assumption that the values of certain accounts can be forced to take ondesired levels.b. the assumption that the firm faces linear total revenue and total operating costfunctions.c. the assumption that the firms past financial condition is an accurate predictor of itsfuture.d. ease of calculation and preparation.6. Huddleston Manufacturing estimates its sales in 2004 will be $3 million. Interestexpense is expected to remain unchanged at $70,000, and the firm plans to pay cashdividends of $140,000 during 2004. Use the per cent-of-sales method to prepare a proforma income statement for the year ended December 31, 2004, based on the 2003income statement shown below.

Figure 2-10 Huddleston Manufacturing Company Income Statement Income Statement Huddleston Manufacturing Company

For the Year Ended December 31, 2003 Sales $2,800,000Less: Cost of goods sold 1,820,000Gross profits $980,000Less: Operating expenses 240,000Operating Profits $740,000Less: Interest expense 70,000Net profits before taxes $670,000Less: Taxes 268,000Net profits after taxes $402,000Less: Cash Dividends 132,000To: Retained earnings $270,0007. Use the following information to complete the balance sheet and sales information in thetable that follows for Hopkins Industries using the following financial data. Then answer thequestions below.Debt ratio: 65%Quick ratio: 1.1xTotal assets turnover: 2.5xReceivables turnover: 8.333Gross profit margin on sales: 30%Inventory turnover ratio: 5x Hopkins Industries Balance Sheet Cash ___________ Accounts Payable __________Accounts Receivable ___________ Long Term debt $300,000Inventories ___________ Common stock __________Fixed Assets ___________ Retained earnings $225,000Total Assets $1,000,000 Total Liab. & Equity __________Sales ___________ Cost of Goods Sold __________ Answer Key to Review Questions 1. a2. c3. c4. b5. c 6. Huddleston Manufacturing Company

Pro Forma Income Statement Huddleston Manufacturing Company For the Year Ended December 31, 2004 Sales $3,000,000 (1mark)Less: Cost of goods sold (65%) 1,950,000 (2 marks) Gross profits $1,050,000 (1mark)Less: Operating expenses (8.57%) 257,142 (2 marks) Operating Profits $792,858 Less: Interest expense 70,000 (1mark)Net profits before taxes $722,858 Less: Taxes (40%) 289,143 (2 marks) Net profits after taxes $433,714 (1mark)Less: Cash Dividends 140,000 To: Retained earnings $293,714 Creditors Turnover Ratio for E10Block2FINAL-09-11-2009 Add To Collection 2.8K Reads 1 Readcasts 4 Sections

Financial Statements: What is Ratio Analysis?

Financial Ratio Tools Financial Assessment Liquidity Ratios Current Ratios Quick Ratios Working Capital Formula: Activity Ratios Inventory Turnover Ratio: Days Sales of Inventory DSI Receivables Turnover Ratio: Average Collection Period: Creditors Turnover Ratio Asset Turnover Analysis: Important Things to be remembered: Fixed Assets Turnover Leverage (Debt Ratios) Debt Ratio: Debt to Equity Ratio: Interest Coverage Ratio: Profitability Ratios Gross Profit Margin Operating Profit Margin Net Profit Margin: Return on assets (ROA): Earnings per Share: Return on equity: Market Ratios Price Earnings Ratio (P/E): Book Value per Share Market price/Book Ratio (P/B) Horizontal Financial Statement Analysis Example: Common Size Balance Sheet Vertical/Cross-Sectional/Common Size Analysis Techniques Horizontal Financial Statement Analysis for two years Difference between vertical analysis and horizontal analysis: History Calculation of DuPont: Applications of the DuPont Framework: Strengths of the DuPont Model: Limitations of the DuPont analysis: Assumptions of the DuPont method: Shareholders Value and Du Pont Identity: The Structure of the CFS Operations Investing

Financing Analyzing an Example of a CFS Relationship between Cash Flow Statement, Balance Sheet and Income Statement Conclusion Cash Flow Budget Cash Receipts Cash Disbursements Financial Projections/Pro Forma Statements Pandora Developments Income Statement Pandora Developments Balance Sheet Pro Forma Income Statement Income to percentage of sales Pro Forma Balance Sheet, Completed Problem Explanation: Summary and Review Review Questions Dana Dairy Products, Income Statement Dana Dairy Products, Balance Sheet Hopkins Industries Answer Key to Review Questions References

Info and Rating Category: Uncategorized. Rating: Upload Date: 12/14/2010 Copyright: Attribution Non-commercial Tags: This document has no tags. Free download as PDF File (.pdf), text file (.txt) or read online for free. Flag document for inapproriate content Leave a Comment You must be logged in to leave a comment. Submit Characters: 400 About

About Scribd Blog Join our team! Contact Us

Advertise with us

Get started AdChoices

Support

Help FAQ Press

Partners

Publishers Developers / API

Legal

Terms Privacy Copyright

Copyright 2012 Scribd Inc. Language: English