Ratio Analysis

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

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:

Jason is a very insistent (some would say pushy) man. When you told him you would need additional information before making your decision, 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.
• List three other ratios you would want to calculate for P. Jason Corporation.
• 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.