In July 2015, the owner of the Anandam Company approached a bank for additional funding to meet the growing requirements of his garment manufacturing firm. The owner was confident about the financial prospects of his firm, with its fourfold increase in revenue and phenomenal increase in profit after taxes over the last three years. In a lengthy discussion with the bank manager, the owner shared the development of his company and the dynamics and growth opportunities of the garment and textile market in India. He believed his firm was performing strongly in a highly competitive industry environment. The bank manager instructed the loan officer to process the loan application as soon as possible and make a decision. Determining the health of the company would involve selected ratio analysis. Was the Anandam Company a good candidate for receiving a loan?
Required – Assuming the role of the loan officer prepare a three page memorandum that analyses the financial conditions of Anandam Company and make recommendations relating to the company’s desired expansion.
Note: All ratios should use year-end totals rather than average. The 3 page memorandum should be supported by an excel sheet for all ratios used.
