Question

1.

value:
10.00 points

Crowley Building Supply sells various building materials toretail outlets. The company has just approached Sycamore State Bankrequesting a $300,000 loan to strengthen the Cash account and topay certain pressing short-term obligations. The company’sfinancial statements for the most recent two years follow:

Crowley Building Supply
Comparative Balance Sheets
	This Year		Last Year
Assets
Current assets:
Cash	$	56,500	$	141,500
Marketable securities		1,500		19,500
Accountsreceivable, net		476,000		288,000
Inventory		948,560		588,530
Prepaidexpenses		19,500		26,500
Total currentassets		1,502,060		1,064,030
Plant and equipment,net		1,641,620		1,546,580
Total assets	$	3,143,680	$	2,610,610
Liabilitiesand Stockholders' Equity
Liabilities:
Currentliabilities	$	806,000	$	445,000
Bondspayable, 8%		616,500		616,500
Totalliabilities		1,422,500		1,061,500
Stockholders'equity:
Preferred stock, $25 par, 7%		318,000		318,000
Commonstock, $10 par		510,000		510,000
Retainedearnings		893,180		721,110
Total stockholders'equity		1,721,180		1,549,110
Total liabilitiesand stockholders' Equity	$	3,143,680	$	2,610,610

Crowley Building Supply
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,021,000	$	4,363,000
Cost of goodssold		3,870,200		3,434,200
Gross margin		1,150,800		928,800
Selling andadministrative expenses		653,300		534,300
Net operatingincome		497,500		394,500
Interestexpense		49,320		49,320
Net income beforetaxes		448,180		345,180
Income taxes(35%)		156,863		120,813
Net income		291,317		224,367
Dividends paid:
Preferred dividends		22,260		22,260
Commondividends		96,987		61,497
Total dividendspaid		119,247		83,757
Net incomeretained		172,070		140,610
Retained earnings,beginning of year		721,110		580,500
Retained earnings,end of year	$	893,180	$	721,110

During the past year, the companyhas expanded the number of lines that it carries in order tostimulate sales and increase profits. It has also movedaggressively to acquire new customers. Sales terms are 2/10, n/30.All sales are on account.

Assume that the following ratios are typical of companies in thebuilding supply industry:

Current ratio	2.5
Acid-test ratio	1.2
Average collectionperiod	18	days
Average saleperiod	50	days
Debt-to-equityratio	0.75
Times interestearned	6.0
Return on totalassets	10	%
Price-earningsratio	9

Required:

1.	Sycamore State Bank is uncertain whether the loan should bemade. To assist it in making a decision, you have been asked tocompute the following amounts and ratios for both this year andlast year:

a.	Working capital.

b.	Current ratio. (Round your answers to 2 decimalplaces.)

c.	Acid-test ratio. (Round your answers to 2 decimalplaces.)

d.	Average collection period. (The accounts receivable at thebeginning of last year totaled $255,000.) (Round yourintermediate calculations and final answers to 1 decimal place. Use365 days in a year.)

e.	Average sale period. (The inventory at the beginning of lastyear totaled $508,000.) (Round your intermediatecalculations and final answers to 1 decimal place. Use 365 days ina year.)

f.	Debt-to-equity ratio.(Round your answers to 2 decimal places.)

g.	Times interest earned.(Round your answers to 1 decimal place.)

2.	For both this year and lastyear:

a.	Present the balance sheet in common-size form. (Roundyour percentage answers to 1 decimal place i.e., 0.123 isconsidered as 12.3. Due to rounding, figures may not fullyreconcile down a column.)

b.	Present the income statement in common-size form down throughnet income. (Round your percentage answers to 1 decimalplace i.e., 0.123 is considered as 12.3. Due to rounding, figuresmay not fully reconcile down a column.)