Reference no: EM131933716

You are a loan officer with Third Texas Bank. Dan Scott owns two successful restaurants, each of which has applied to your bank for a $250,000 one-year loan for the purpose of opening a second location. Condensed statement of financial position for the two business entities are shown below: Texas Steak Ranch Statement of Financial Position December 31, 2015 Current assets $75,000 Current liabilities $30,000 Plant and equipment 300,000 Long-term liabilities 200,000 Capital stock 100,000 Retained Earnings 45,000 Total Assets $375,000 Total liabilities and equity $375,000 The Stockyards Statement of Financial Position December 31, 2015 Current assets $24,000 Current liabilities $30,000 Plant and equipment 301,000 Long-term liabilities 200,000 Capital, Dan Scott 95,000 Total Assets $325,000 Total liabilities and equity $325,000 Both restaurants are popular and have been successful over the past several years. Texas Steak Ranch has been slightly more profitable, but the operating results for the two businesses have been quite similar. You think that either restaurant’s second location should be successful. On the other hand, you know that restaurants are a very “faddish” type of business and that their popularity and profitability can change very quickly. Dan Scott is one of the wealthiest people in Texas. He made a fortune – estimated at more than $2 billion – as a founder of Micro Time, a highly successful manufacturer of a computer software. Scott now is retired and spends most of his time at Second Life, his 50,000-acre cattle ranch. Both of his restaurants are run by experienced professional managers. Instructions 1. Compute the current ratio and working capital of each business entity 2. On the basis of the information provided in this case, which of these businesses do you consider to be the better credit risk? Explain fully.