You are working as a loan officer at TransPacific Bank and are analyzing a loan request for a client when you come across the following footnote in the client’s annual report:
Inventories are priced at the lower of cost or market of materials plus other direct (variable) costs. Fixed overheads of $4.2 million this year and $3.0 million last year are excluded from inventories. Omitting such overhead resulted in a reduction in net income (after taxes) of $720,000 for this year. Our tax rate is 40 percent.
In preparing to present the loan application to the bank’s loan committee, write a brief paragraph in nontechnical terms describing what this footnote means and how it affects the bank’s evaluation of the financial condition of the borrower.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.