The 2017 financial statements for the Thor and Gunnar companies are summarized below.

These two companies are in the same business and in the same province but in different cities. One-half of Thor?s sales and one-quarter of Gunnar?s sales are on credit. Each company has been in operation for about ten years. Both companies received an unqualified audit opinion on the financial statements. Thor Company wants to borrow $105,000, and Gunnar Company is asking for $36,000. The loans will be for a two-year period. Neither company issued shares in 2017.

Required:

1. Calculate the ratios in Exhibit 13.5 for which sufficient information is available. Round all calculations to two decimal places.

2. Assume that you work in the loan department of a local bank. You have been asked to analyze the situation and recommend which loan is preferable. Based on the data given, your analysis prepared in requirement 1 and any other information, give your choice and the supporting explanation.

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Thor Gunnar Company Company Balance Sheet $ 35,000 $ 54,000 Cash Accounts Receivable, Net 77,000 6,000 Inventory 154,000 30,000 192,000 Property and Equipment, Net 770,000 Other Assets 196,000 68,400 $ 1,232,000 $ 350,400 Total Assets $ 168,000 $ 18,000 Current Liabilities Long-Term Debt (12% interest rate) 266,000 66,000 Contributed Capital (33,600 shares; 12,600 shares) 672,000 252,000 Contributed Surplus 70,000 4,800 Retained Earnings 56,000 9,600 Total Liabilities and Shareholders' Equity $ 1,232,000 $ 350,400 Income Statement Sales Revenue $ 1,120,000 $ 336,000 Cost of Goods Sold (672,000) (180,000) Expenses (including interest and income tax) (336,000) (114,000) Net Income $ 112,000 $ 42,000 Selected Data from 2016 Statements Accounts Receivable, Net 65,800 $ 13,200 Inventory 133,000 45,600 Property and Equipment, Net 770,000 192,000 Long-Term Debt (12% interest rate) 266,000 66,000 Total Shareholders' Equity 798,000 266,400 Other Data Per share price at end of 2017 13.20 19.60 %24