Suppose you work in the loan department of Superior Bank. Dean Young, owner of Dean Young Beauty Aids, has come to you seeking a loan for $500,000 to expand operations. Young proposes to use accounts receivable as collateral for the loan and has provided you with the following information from the company’s most recent financial statements:
Requirement
Analyze the trends of sales, days’ sales in receivables, and cash collections from customers for 2013 and 2012. Would you make the loan to Young? Support your decision with facts and figures.
2013 2012 2011 (In thousands) Sales. $1,475 $1,001 $902 Cost of goods sold.. Gross profit. Other expenses.. Net profit or (loss) before taxes.. 876 647 605 599 354 297 **. 518 287 253 $ 81 67 S 44 Accounts receivable... $ 128 $ 107 $ 94 Allowance for doubtful accounts.. 13 11
> Dave Dern, the chief financial officer, is responsible for The Grand Design’s cash budget for 2013. The budget will help Dem determine the amount of long-term borrowing needed to end the year with a cash balance of $135,000. Dern’s assistants have assemb
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> McIntosh stores use point-of-sale terminals as cash registers. The register shows the amount of each sale, the cashreceived from the customer, and any change returned to the customer. The machine also produces a customer receipt but keeps no record of tr
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> Assume Thrifty-One Credit Union completed these transactions: 2012 Sep 1 Loaned $75,000 to Lily Heart on a one-year, 11% note. Dec 31 Accrued interest revenue on the Heart note. 2013 Sep 1 Collected the maturity value of the note from Heart (principal pl
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> On September 30, Premier Party Planners had a $28,000 balance in Accounts Receivable and a $3,000 credit balance in Allowance for Uncollectible Accounts. During October, the store made credit sales of $163,000. October collections on account were $127,00
> At December 31, 2012, Get Away Travel has an Accounts Receivable balance of $89,000. Allowance for Doubtful Accounts has a credit balance of $810 before the year-end adjustment. Service Revenue for 2012 was $700,000. Get Away Travel estimates that Doubtf
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