Today, I have two clients from two different companies who have spoken to me
for a loan. Therefore, both clients who represent their respective corporations handed me
their company’s portfolios, which contain the 12/31/05 balance sheets and income statements.
The first portfolio I analyze was the ABC Corporation, and its balance sheet has a total assets
liabilities & stock holders’ equity of $62,010. The income statement for ABC has a net income
of $3,960 for the year ended 12/31/05. In addition, the plant depreciation has a straight line of 50
years estimated life with no salvage value with $350 depreciation per year. The equipment has a
straight line depreciation with 10 years estimated life with $6000 salvage value, depreciation of
$2200 per year with the equipment depreciation of $2200 and cost of goods sold was $32,990.
The second portfolio I analyze was XYZ Corporation, and its balance sheet has a total assets
liabilities & stock holders’ equity of $45,735. The income statement for XYZ has a net income
of $1795 for the year ended 12/31/05. In addition, the plant depreciation has a straight line of 40
years estimated life with $1500 salvage value with depreciation $400 per year. The equipment
has sum-of-years digits depreciation with 7 years estimated life with no salvage value,
depreciation of $3000 per year and cost of goods sold was $34,100.
After reviewing both company portfolios, I found that Corporation ABC has more total
assets, liabilities and stockholders’ equity with a higher net income than XYZ; however, XYZ
has a higher cost of goods sold and less equipment depreciation with only one depreciation of
$3000 this year. The decision is tough I would go ahead and loan ...