Heartland Inc. is a medium-size company that has been in business for 20 years. The industry has become very competitive in the last few years, and Heartland has decided that it must grow if it is going to survive. It has approached the bank for a sizable five-year loan, and the bank has requested Heartland€™s most recent financial statements as part of the loan package.

The industry in which Heartland operates consists of approximately 20 companies relatively equal in size. The trade association to which all of the competitors belong publishes an annual survey of the industry, including industry averages for selected ratios for the competitors. All companies voluntarily submit their statements to the association for this purpose.

Heartland€™s controller is aware that the bank has access to this survey and is very concerned about how the company fared this past year compared with the rest of the industry. The ratios included in the publication and the averages for the past year are as follows:

Ratio                                                                Industry

                                                                         Average
Current ratio..................................................1.23
Acid-test (quick) ratio ...................................0.75
Accounts receivable turnover ..........................33 times
Inventory turnover ............................................29 times
Debt-to-equity ratio ......................................0.53
Times interest earned .....................................8.65 times
Return on sales .............................................6.57%
Asset turnover .................................................1.95 times
Return on assets ..............................................12.81%
Return on common stockholders€™ equity .......17.67%

The financial statements to be submitted to the bank in connection with the loan follow.

                          Heartland Inc.
Statement of Income and Retained Earnings
    For the Year Ended December 31, 2014
                    (thousands omitted)
Sales revenue ......................................................................$ 542,750
Cost of goods sold ................................................................(435,650)
Gross profit ...........................................................................$ 107,100
Selling, general, and administrative expenses ..................$ (65,780)
Loss on sales of securities............................................................(220)
Income before interest and taxes .........................................$ 41,100
Interest expense .........................................................................(9,275)
Income before taxes ................................................................$ 31,825
Income tax expense ..................................................................(12,730)
Net income ................................................................................$ 19,095
Retained earnings, January 1, 2014 ...........................................58,485
                                                                                                        $ 77,580
Dividends paid on common stock ...........................................(12,000)
Retained earnings, December 31, 2014 .................................$ 65,580

Required
1. Prepare a columnar report for the controller of Heartland Inc. comparing the industry averages for the ratios published by the trade association with the comparable ratios for Heartland. For Heartland, compute the ratios as of December 31, 2014, or for the year ending December 31, 2014, whichever is appropriate.
2. Briefly evaluate Heartland€™s ratios relative to the industry averages.
3. Do you think that the bank will approve the loan? Explain your answer.

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Heartland Inc. Comparative Statements of Financial Position (thousands omitted) December 31, 2014 December 31, 2013 Assets Current assets: $ 1,135 Cash 750 Marketable securities 1,250 15,650 2,250 12,380 Accounts receivable, net of allowances Inventories 12,680 15,870 Prepaid items 385 420 $ 31,100 $ 31,670 Total current assets Long-term investments Property, plant, and equipment: 425 425 $ 32,000 $ 32,000 Land Buildings and equipment, net of accumulated depreciation 206,000 $238,000 $270,095 216,000 $248,000 $279,525 Total property, plant, and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: $ 8,750 $ 12,750 14,380 2,430 Short-term notes Accounts payable 20,090 Salaries and wages payable Income taxes payable 1,975 3,130 $ 33,945 $ 80,000 2,050 $ 31,610 $ 80,000 Total current liabilities Long-term bonds payable Stockholders' equity: Common stock, no par Retained eamings Total stockholders' equity $100,000 65,580 $100,000 58,485 $158,485 $165,580 Total liabilities and stockholders' equity $279,525 $270,095