Mode Milano is a bridal gown manufacturing company in Milan. Recently, the company received an order for $500,000 of merchandise from HG Lang with payment to be made within 60 days of delivery. Mode asked Lang to provide a copy of its audited financial statements from 2012 and 2011 so that it could analyze them before accepting the order.

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. Compute the following ratios to help Mode Milano decide whether to accept the order from HG Lang: current ratio, acid test, debt-to-equity ratio, times interest earned, and return on total assets.
b. Based on the analysis in part a, does it appear that HG Lang will have any difficulty paying its bill to ModeMilano?

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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