Question 3 10 marks Barton Company requested a large loan from First National bank to acquire...

80.2K

Verified Solution

Question

Accounting

Question 3 10 marks Barton Company requested a large loan fromFirst National bank to acquire a large piece of land for futureexpansion. Bart reported current assets of R1,900 ,000 (R430 000 incash) and current liabilities of R1,075,000. FNB denied the requestfor a number of reasons. When the Company received the news, thefinancial controller immediately paid R420 000 that was owed toseveral trade creditors. He then asked the bank to reconsider theloan application. Based on the abbreviated facts would you adviseFNB to advance the loan? Why? Are the actions of the financialcontroller ethical? 1) What could be the reasons for the denial ofthe request for a loan? (2) 2. After the actions of the controllerwhat would be your advice for FNB and why (7) 3. Are the actions ofthe financial controller ethical? (1) NB: limit your answer for all3 sub-questions to 500 words or less.

Answer & Explanation Solved by verified expert

4.3 Ratings (813 Votes)

1 Possible Reasons for denial of the request for loan First of all lets understand what a current ratio means and indicates Current ratio is calculated by dividing current assets with current liabilities and indicates the companys ability to meet its current obligations Hence higher the current ratio the better it is and higher are the chances of a creditorbank sanctioning you a loan Generally a current ratio of 15 or higher is considered as acceptable by any industry In the current case Barton had a current ratio of 177 19000001075000 which shows that the company will be in a good position to meet its current obligations including interest payments on a loan However current ratio is not the only financial ratio a bank looks for while providing a loan While the current ratio might See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member