2A2Z MARBLE SAVINGS BANK HAS RECEIVED LOAN APPLICATIONS FROM THREE CO...
50.
CSO: 2A2b
LOS: 2A2z
Marble Savings Bank has received loan applications from three companies in the auto
parts manufacturing business and currently has the funds to grant only one of these
requests. Specific data, shown below, has been selected from these applications for
review and comparison with industry averages.
Bailey
Nutron
Sonex
Industry
Total sales (millions)
$4.27
$3.91
$4.86
$4.30
Net profit margin
9.55%
9.85%
10.05%
9.65%
Current ratio
1.82
2.02
1.96
1.95
Return on assets
12.0%
12.6%
11.4%
12.4%
Debt/equity ratio
52.5%
44.6%
49.6%
48.3%
Financial leverage
1.30
1.02
1.56
1.33
Based on the information above, select the strategy that should be the most beneficial to
Marble Savings.
a.
Marble Savings Bank should not grant any loans as none of these companies
represents a good credit risk.
b.
Grant the loan to Bailey as all the company’s data approximate the industry
average.
c.
Grant the loan to Nutron as both the debt/equity ratio and degree of financial
leverage are below the industry average.
d.
Grant the loan to Sonex as the company has the highest net profit margin and
degree of financial leverage.