HG Lang is planning to open a new store in Miami that will be financed in part by a new bank loan of $1,500,000.

HG Lang Designs operates an exclusive bridal boutique in Manhattan. All gowns are designed by Lang but are manufactured by various small firms in France and Italy. The following financial information for the company relates.

HG Lang Designs
Income Statements

Required
a. Assuming debt was $1,500,000 higher in 2012, what would the debt-to-equity ratio have been?
b. Assume that the additional debt will add $110,000 of interest expense. What would times interest earned have been in 2012 if interest expense had been $110,000 higher?
c. Assume you are a bank manager evaluating the potential $1,500,000 loan to HG Lang.
Explain why you would or would not be favorably inclined to make theloan.

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HG Lang Designs Balance Sheets December 31 2012 December 31, 2011 Assets Current assets: Cash Accounts receivable Inventory Other current assets Total current assets 65,000 352,000 1,795,000 62,000 2,274,000 1,611,000 $3,885,000 88,000 333,200 1,764,000 65,000 2,250,200 1,611,000 $3,861,200 Buildings, furniture, and fixtures, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Bank loan payable Other accrued payables Total current liabilities $ 73,000 89,000 13,000 175,000 311.000 486,000 65,200 110,000 11,000 186,200 366,000 552,200 Long-term debt Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders'equity 1,248,000 2,151,000 3,399,000 $3,885,000 1,248,000 2061,000 9,0 Total liabilities and stockholders' equity $3,861,200 December 31, 2012 December 31, 2011 Net sales Cost of goods sold Gross margin Operating expenses: $20,632,000 $19,282,000 14,442,000 6,190,000 12,533,000 6,749,000 Selling expenses 578,000 2,314,000 92 3,857,000 640,000 2,682,000 General and administrative expenses Total operating expenses Operating income Interest expense Income before taxes Income taxes Net income 2,868,000 2,839,000 994,000 1,845,000 3,819,000 1337,000 2482,000