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Frances Sabatier asked a local bank for a $50000 loan to expand her small company. The bank asked Frances to submit a financial statement of the business to supplement the loan application

Frances Sabatier asked a local bank for a $50,000 loan to expand her small company. The bank asked Frances to submit a financial statement of the business to supplement the loan application. Frances prepared the following balance sheet.

 

FS COM ANY Balance Sheet une 30, 2012

 

Assets

Cash and investments

 

 

$ 9,000

Inventory

30,000

Equipment

46,000

Personal residence (monthly payments, $2,800)

300,000

Remaining assets

20,000

otal assets

$405,000

Liabilities

Short-term debt to suppliers

 

$ 62,000

Long-term debt on equipment

38,000

Total debt

100,000

Stockholders’ Equity

305,000

otal liabilities and stockholders’ equity

$405,000

 

 

 

 

 

 

 

Required:

The balance sheet has several flaws. However, there is at least one major deficiency. Identify it and ex- plain its significance.

Jun 22 2020 View more View Less

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