At first glance looking and comparing both balance sheets, I was almost ready to give Melinda Garcia the loan based on her total assets of $244,000. LL Sam's total assets of $211,500 did not impress me as much as Melinda's total assets. Then I took a closer look and started adding up Accounts receivable vs accounts payable for LL Sam's.
LL Sam's has $2,000.00 in equity each month compared to Melinda Garcia's Accounts receivable vs her accounts payable of $1,000.00 a month. LL Sam's accounts receivable of $14,000.00 is twice as much as Melinda's $7,000.00 a month. LL Sam's accounts payable is $12,000.00 compared to Melinda Garcia's accounts payable which is $6,000.00 a month.
Based on both balance sheets I would give LL Sam's the business loan. The reason why is because Melinda Garcia only has $1,000.00 a month in equity compared to LL Sam's $2,000.00 equity a month. I also looked at Total liabilities LL Sam's has $30,000.00
compared to Melinda Garcia who has $174,000.00. Melinda Garcia's total liabilities are almost six times higher than LL Sam's. LL Sam's total capitol is $181,000 vs Melinda Garcia's capitol of $70,000.00.
I would definitely grant a loan to LL Sam's over Melinda Garcia based on the debt ratio, which is the "ratio of total liabilities to total assets. Shows the proportion of a company's assets that it has financed with debt." (Hongren, Harrison, & Bamber, 2005). I would also require a business history report which should include how long has each business been in operation. I would want to see balance sheets going back at least six months. I would also inquire with the better business bureau to see if the company has had any complaints against them.
This could mean a loss of business for a company, which in turn...
"Business Environment and Recording Transactions"
Useful for the person who knows who LL Sam and Melinda Garcia are. I would have one recommendation for you - and that is to attach the information about Melinda and LL Sam so the reader has background knowledge about your topic. Otherwise, it's not so useful. However, you did bring into account the importance of looking beyond just assets.
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