Anandam Manufacturing Company
For this assignment, you will take the role of the bank that Anand Agarwal has requested a loan from.
1. For the years 2013 through 2015, calculate and provide the following ratios for Anandam:
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROE
Receivable Days
Inventory Days
Times Interest Earned Ratio
Debt Ratio
Current Ratio
2. For each of the ratios in Question 1, indicate whether the trend is improving, deteriorating, or neither over the three year period. Feel free to explain any that you think may be confusing.
3. For the following ratios, compare the value you calculated for Anandam in 2015 to the Sector Average provided in Exhibit 3. Indicate whether Anandam is doing better than, worse than, or the same as the industry average. Feel free to explain any that you think may be confusing.
Current Ratio
Receivable Days
Inventory Days
Gross Profit Ratio (same as Gross Profit Margin)
Net Profit Ratio (same as Net Profit Margin
Return on Equity
Total Asset Turnover
4. If Anandam could reduce Receivable Days to the industry average, how much cash would that generate for the firm at the end of 2015?
5. If Anandam could reduce Inventory Days to the industry average, how much cash would that generate for the firm at the end of 2015?
6. Assume that the requested loan amount is 5 million (the case states 50 million, but that appears to be a typo). If the interest rate on the loan is 14% and Anandam uses the entire amount, what would the Time Interest Earned have been for each of the past three years if the additional interest expense would have been included?
7. As the bank, would you extend the requested loan to Anandam? Provide three reasons to support your decision.
Attachment:- Proact_Model.rar