# Amortization Schedule of Loan - Paper Example

Date:  2021-07-05 03:45:33
2 pages  (480 words)
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I used the MS Spreadsheet to prepare the amortization schedule, which highlights all the details of how the \$1,000,000 loan amount will be repaid until there is nil balance at the end of the fifth year. The screenshot is attached.

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The annual mortgage amount is \$277,409.73 and the total interest over the five year period is \$387,048.65.

Financial Statement

Total asset turnover = sales/total assets

5 = 2,000,000/total assets

Total assets = 400,000

Current ratio = total current assets/total current liabilities

3 = total current assets/72000

Total current assets = \$216,000

Total debt/total asset = 0.4

Total debt/400,000 = 0.4

Total debt = \$160,000

Total liabilities and debt = \$400,000

Total debt = \$160,000

Shareholders Equity = (400,000 160,000) =\$240,000

Current liabilities to equity ratio = 0.3 = Current Liabilities/240,000

Current liabilities = \$72,000

Fixed assets = 400,000 216,000 = \$184,000

Quick Ratio = 2 = (accounts receivable + Cash)/current liabilities

(Accounts receivables + Cash) = 72000*2 = \$144,000DuPoint Identity #33

Return on Stockholders Equity = Net Income/ Stockholders Equity = \$600,000/\$2400000 = 0.25 which is equivalent to 25 percent.

Net profit margin = (Net Income/Total Sales)*100 = 400,000/10,000,000 * 100 = 4 percent.

Equity Multiplier = Total assets/Total equity = 4000000/2400000 = 1.67

Sales = total assets * total assets turnover = 4,000,000*2.5 = \$10,000,000

The equity multiplier differs for Gulf from that of the industry average. Where the companys is 1.67 the industrys stands at 1.5. That means the industrys assets are largely funded by debt compared to the firms. There is also a difference in net profit margin where Gulf seems to be posting better revenues compared to the average industry.

The company can increase its multiplier effect to have more free cash to utilize, which will likely lead to better returns. Being too much dependent on equity denies the business an opportunity to utilize externally available financing options to make more returns. The firm can use that to expand, introduce new products among other initiatives likely to increase revenue. Utilizing external financing will post more profits, and with the equity remaining low the return on equity will be relatively higher.