Decision Analysis - Case Study Example

With an owner’s equity of $76,840, the company meets the second criterion; it has an owner’s equity of more than $50,000.

Its current ratio is (47740/16000) = 2.98. This value is greater than 1.50; hence the company also meets the third criterion.

From the following analysis, Mr. Chan is eligible for the loan from the bank because the company meets all the requirements: it is profitable; has owner’s equity of more than $50,000; and has a current ratio of greater than 1.50.

A cash withdrawal of $20,000 will not affect the decision of the bank. First, it reduces the owner’s equity to (76840-20000) = $56,840, which is still greater than $50,000. It decreases the current ratio to [(74740-20000)/16000] = 1.73, which again is greater than 1.50. Finally, it does not affect the profitability of the company; therefore, the company will still be profitable.