Accounting Essay Example | Topics and Well Written Essays - 750 words - 4

Accounting - Essay Examplethat would be distributed to holders of each share of common stock if all assets were sell at their balance sheet carrying amounts after all the creditors were paid off. Book value per share is based entirely on historical costs.The bank should not approve a five-year $500,000 loan to Stephens Company due to the times interest earned and debt-equity ratios. Stephens Companys times interest earned ratio is 3.5, subvert than Stephens industry (5). Also, the debt-to-equity ratio is 1.036, greater than 0.8 (industry ratio). Both of these figures show that the company earnings are lower than competitors and also that the company relies too much on loans or debt. The current ratio is higher than competitors and the acid-test ratio is lower than the industry average. Most of the current assets are inventory and prepaid expenses, which cannot be converted to silver quickly. The gross margin is lower than the industry average and the ability of company to generate profit is low. This company does not have good prospects the long