Question

Your client owns an industrial building that secures a $3,500,000 loan provided by your bank. There are four tenants in the building that generate gross annual revenue of $973,000. Last quarter's balance sheet shows total current assets of $153,200, including cash of $72,000; accounts receivables of $56,000; prepaid expenses of $11,400; and accounts payable of $16,000. Are there any red flags that need investigating, and if So, what are they? The gross revenues seem high and require further investigation The accounts receivable balance seems high and requires further investigation The accounts payable balance seems high and requires further investigation There are no red flags. All accounts seem to be reasonable.

Answer 1

A. Gross Revenue seems high and require further investigation

Gross Revenue from four tenents - $973000, Property purchased for $3,500,000. The Purchaser will be abe to recover all the money without considering time value of money in 4 Years. It seems that Gross Revenue is high and require investigation. Rest Accounts Receivables balance and Account Payables balance are reasonable.