Sample Essay

Assuming the interest on the loan to be 10% the interest cover for 2008 for the company will arrive at (2760 /660 ) 4.18 where by the industry cover is 5.7. So this is well in the range and can be afforded by the company.  The debt to equity ratio for the company for 2008 would be at (10500/ 10350) 1.01, while the industry average is at 0.65. This is a very high burden of debt for the company in the industry.

On the basis of the debt ratio of the company, the industry standard for the debt ratio and the performance ratio of the company as mentioned above, the bank will not look favorably upon the company as being able to sustain the level of burden the 3 million loans would be causing it. Therefore there is a possibility the bank may not invest in the company by providing it a loan to finance its operations and the additional machinery required.

The industry norm is 1.2.it is observed that currently the company is investing a lot in at hand inventory. This figure should be reduced. The cash liquidity ratio for the company stood at 0.45 in 2007 and was forecasted at 1.88 for 2008. The return on equity for the company stood at 9.2% in 2007 and was forecasted at 15.4% for 2008, and the earnings per share for the company stood at 6.46 in 2007 and were forecasted at 10.76 for 2008.

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