Mark X

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2.Mark X only has one strength. That strength is the fixed asset turnover ratio. This is the only key ratio that has an upward trend. The weaknesses that Mark X has include: liquidity ratio, current ratio, debt ratio, quick ratio, debt management and efficiency ratios. All of these ratios have a downward trend. The fact that Mark X has so many more weaknesses than strengths does not bode well for the future of the company. Using the extended Dupont equation to analyze Mark X we find that the ROE is on a downward trend as well. A declining return on equity is not good at all for a company. EPS went from 28% to 2% . ROE was affected by both ROA and a declining debt ratio.

3.The bank should not lend money to Mark X. The reason they shouldn't lend to Mark X is because most of Mark X's key ratios are on a downward spiral. Mark X has increasing debt and low liquidity.

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5.In 1993 and 1994 Mark X will be able to invest in marketable securities. I found that end of the year cash balance is $35,874 and that means that the company will have an excess of $25,109. This amount will return an after tax amount of $1,054. Retained earnings would need to be corrected to reflect this amount.

6.Mark X would be able to retire all of the outstanding short term loans by years end 1993. The company would be left with $35,874 in cash and would have an outstanding short term loan balance of $24,608.

7.If the bank decides to withdraw the entire line of credit and demands immediate payment, Mark X will have to pay $27,796. The company's available cash of $3,906 wouldn't be enough tocover this amount. So Mark X could either declare bankruptcy or immediate payment from its debtors.

8.Validity of comparative ratio might be questioned if 1) there are changes out of the control of the company and 2) if the companies compared are of different size. Small businesses