Melinda Garcia Career Service Companies, Assessment Example

Among the information I would require in loaning the two Companies is the status of their working capitals. The other factors are vested interest, business performance history and time of refund (Schroeder, 2007). I would not lend money to business with poor past performance as it is risky. The business that will take longer time with the money resulting to more interest would be preferred. In choosing business to loan from the two sheets (L.L. Sams Company and Melindas’), working capitals and vested interests can be used. The sum of current assets minus current liabilities gives working capital and vested interest given by notes payable (Atis, 2003). This will indicate whether the business has ability of paying present debts and still maintain the business running. Less working capital indicates the high chances that the business might fail (Schroeder, 2007). Sam’s  Current assets is $23,500 (Sum of Cash, Account receivable and Store supplies). The rest are fixed assets (Atis, 2003). The total current liabilities of Sam is $12,000 (Account payable) and so Sam’s working capital is $11,500. Notes payble is long-term liability. Melinda’s Current assets is $19,000 (total of Cash, Account receivable and Office suplies) rest fixed. Melinda’s total current liabilities is $6,000 (Account payable) and hence the working capital becomes $13,000. However, Melinda’s Debts is $174,000 but L.L Sam’s $30,000. I would prefer loaningL.L. Sams Company because though it has less working capital but more equity as compared to Melina’s. High equity indicates that there is low possibility that the business might fail. L.L. Sams Company is considered able to repay the loan due to high equity. This is an indication that L.L Sam’s business is working hard to make it success. It has more equity (181,500) than Melinda’s (70,000).

References

Atis, P. (2003). Business and success: Working capitals market capitalization; Tobol Publishers.

Schroeder, G. (2007). Loan loss coverage under financial institution bonds: American Publisher.