Product Costing-Loan Package

The following are the procedures that will be followed by Toostle Roll Industries in acquiring specific loan package; TOOSTLE ROLL INDUSTRIES SPECIFIC LOAN PACKAGE. Financial ratios.

(a)Liquidity ratios

Quick test= quick asset/ Current liabilities (  This is used to indicate the company's ability to repay instant debts) $ 54,867/53314=  1.90

Current ratio= current asset/ current liabilities $ 126799/53314= 2.78

(b)Profitability ratios

Net profit margin= net income after tax/ net sales ( it is used to show how much revenue is required to earn one dollar profit minus tax.)

$ 56723/ 45678= 1.07

(i) Reviewing specific loan package purpose. The purpose of taking this loan is to meet growing capital requirement of the industry. The company would like to expand its operations in order to increase its income. The company intends to use the funds from the loan to purchase up to date plants and equipments (Guttentag, 2007). The new plants and equipments will help to improve the quality of products produced by the company as well as meeting the growing demand and market of the company's products (Samuel, 2007).

(ii) The amount needed to meet the company growing capital requirements. Toostle Roll Industry needs a growing capital loan amounting to $ 5,331.4 this translates to an increment of 10% in its total liabilities which currently stands at $ 53,314.

(iii) Growing capital repayment period. The company needs a long term loans which is payable within a time period of 3years. The company will be making monthly payment to the lender at the rate of 15%.

(iv) How to generate cash flows to repay the growing capital loan. The company intends to take advantage of the current market and emerging market. It will achieve its objective by using the loan funds to introduce new products to meet the existing customer specifications (Signoriello, 1991). The company will also produce more products to meet the its growing regional and international market. (v) Collateral to be used.

The company intends to use its existing plants and equipments valued at $ 7000 to act as a security incase of the company default in paying back the loan.