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    Financial analysis for approving credit line

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    Using ratio analysis and the attached tables, answer the following questions. Would you approve this customer for a commercial credit line? If so, how much credit line? If not, why would you deny credit to this customer? Analyze the total financial statement and show all ratios utilized for the credit decision, and show work. Use profitability ratios, EBITDA ratios, Leverage ratios, and all liquidity ratios.

    See the attached file.

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    Solution Preview

    I will not be approving this customer for a commercial credit line due to various reasons.

    First of all, if we evaluate the health of the organization from top line revenues and bottom line profitability, the revenues of the company has significantly declined in the last financial year and the company has shown negative profits in the last couple of years. There has been an alarming decline in the gross profit margin as well. It reflects that deteriorating financial condition of the organization. The organization is not able to sustain its revenues and profit margins in the last couple of years, which pose a major doubt on its ability to generate sufficient case for repaying the lenders ...

    Solution Summary

    The solution conducts financial analysis of a company for approving credit line.