Low Carb Corp

question 109

Essay

Low Carb Corp.has current assets of $160,000,total assets of $200,000,current liabilities of $85,000,and total liabilities of $100,000.The company is trying to negotiate a bank loan of $75,000.The terms of the loan require repayment over two years and state that the debt ratio cannot exceed 0.60.Calculate the debt ratio before and after the bank loan.Do you think the loan will be granted?

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Definitions:

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company’s balance sheet.

Just-in-time

An inventory strategy companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Restrictive Policy

Measures taken by a government or financial institution to limit borrowing and spending in an attempt to curb inflation or stabilize the economy.

Neutral Policy

A stance or policy adopted by an organization or government that is neither supportive nor against a particular issue, aiming for a balanced approach.