2017 2016 Current Ratio Ratio Analysis

Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC)

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Scenario: You are a loan officer for White Sands
Bank of Taos. Paul Jason, president of P. Jason Corporation, has just
left your office. He is interested in an 8-year loan to expand the
company’s operations. The borrowed funds would be used to purchase new
equipment. As evidence of the company’s debt-worthiness, Jason provided
you with the following facts:

 2017 2016 Current Ratio 3.1 2.1 Asset Turnover 2.8 2.2 Net Income Up 32% Down 8% Earnings per Share \$3.30 \$2.50

Jason is a very insistent (some would say pushy) man. When you told
he acted offended and said, “What more could you possibly want to know?”
You responded you would , at minimum, need complete, audited financial
statements.

Develop a minimum 700-word examination of the financial statements and include the following:

• Explain why you would want the financial statements to be audited.
• Discuss the implications of the ratios provided for the lending
decision you are to make. That is, does the information paint a
favorable picture? Are these ratios relevant to the decision? State why
or why not.
• Evaluate trends in the performance of P. Jason Corporation. Identify
each performance measure as favorable or unfavorable and explain the
significance of each.
• List three other ratios you would want to calculate for P. Jason
Corporation, and in your own words explain in detail why you would use
each.
• As the loan officer, what else would you do to gain a better
understanding of Paul Jason’s, and the Corporation’s financial picture
and why?
• Based on your analysis of P. Jason Corporation, will you recommend
approval for the requested loan? Provide specific details to support
your decision. Format the assignment consistent with APA guidelines.