1. Compute the following for years 2004 and 2005 (all sales are on account; long-term liabilities are owed to the companys bank; terms of sale are net 30 days; use average values where applicable e.g. accounts receivable turnover and inventory turnover):

• Working Capital
• Current Ratio
• Acid test ratio
• Accounts receivable turnover
• Collection period of receivables
• Inventory turnover
• Days to sell inventory
• Debt to-equity ratio
• Times interest earned

2. Using 2003 as the base year, compute an index-number trend series for:

- Sales

- Cost of goods sold

- Gross profit

- Marketing and administrative costs.

- Net Income

3. Based on your calculations in 1 and 2, prepare a recommendation on whether to grant a loan to this company. Support your recommendation with numbers.

All calculations should be answered using excel (you need to calculate using formulas in excel) and discussion of recommendation should be answered in word or excel.

Balance Sheet Income Statement 2005 2004 2003 Assets Cash Accounts receivable, net Inventory Other current assets Plant and equipment, net Total assets 12,000 183,000 142,000 5,000 160,000 502,000 14,000 80,000 97,000 6,000 110,000 307,000 17,000 60,000 52,000 4,000 70,000 203,000 Net Sales Cost of goods sold Gross profit Marketing and administrative costs Operating Income Interest cost Income before income tax Income tax Net Income 2005 1,680,000 923,000 757,000 670,000 87,000 12,000 75,000 30,000 45,000 2004 1,245,000 805,000 440,000 396,700 43,300 7,300 36,000 14,400 21,600 2003 1,050,000 512,000 538,000 467,760 70,240 2,240 68,000 28,000 40,000 Liabilities and Equity Accounts payable Federal income tax payable Long-term liabilities Common stock, $5 par value Retained earnings Total liabilities and equity 147,800 30,000 120,000 110,000 94,200 502,000 49,400 14,400 73,000 110,000 60,200 307,000 23,000 28,000 22,400 80,000 49,600 203,000 Statement of Retained Earnings Balance, beginning Add: Net income Subtotal Deduct: Dividends paid Balance, ending 2005 60,200 45,000 105,200 11,000 94,200 2004 49,600 21,600 71,200 11,000 60,200