posted a question May 06, 2012 at 4:11am Q analyzing credit constraints for a bank loan aspero, inc. has sales of approximately $500,000 per year. Aspero requires a short-term loan of $100,000 to

posted a question

May 06, 2012 at 4:11am

Q analyzing credit constraints for a bank loan

aspero, inc. has sales of approximately $500,000 per year. Aspero requires a short-term loan of $100,000 to finance its working capital requirements. two banks are considering aspero’s loan request but each bank requires certain minimum conditions be satisfied. bank america requires at least a 25% gross margin on sales, and bank boston requires a 2:1 current ratio. the following information is available for aspero for the current year:

– sales returns and allowances are 10% of sales

– purchases returns and allowances are 2% of purchases

– sales discounts are 2% of sales

– purchase discounts are 1% of purchase

– ending inventory is $138,000

– cash is 10% of accounts receivable

– credit terms to aspero’s customers are 45 days

– credit terms aspero receives from its suppliers are 90 days

– purchases for the year are $400,000

– ending inventory is 38% greater than beginning inventory

– accounts payable are the only current liability

access whether aspero, inc. meets the credit constraint for a loan from either or both banks. show computations.

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