a. Calculate the financial ratios for 2019 corresponding to the industry norms provided below: (13 Marks)

	Ratio Norm
Current ratio	1.80
Acid-test ratio	0.90
Debt ratio	0.50
Long-term debt to total capitalization	0.70
Times interest earned	10.00
Average collection period	20.00
Inventory turnover (based on COGS)	7.00
Return on total assets	8.40%
Gross profit margin	25.0%
Operating income return on investment	16.8%
Operating profit margin	14.0%
Total asset turnover	1.20
Fixed asset turnover	1.80

b. Which of the ratios reported above in the industry norms do you feel should be most crucial in determining whether the bank should extend the line of credit? Why? (4 Marks) (500 words)

c. Use the information provided by the financial ratios to decide if you would support making the loan. (3 Marks) (500 words)

RPI, Inc. Income Statement For the Year Ended 12/31/2019 $700,000 500,000 $200,000 Sales (all credit) Less: Cost of goods sold Gross profits Less: Operating and interest expenses General and administrative Depreciation Total Profit before Interest and taxes (EBIT) Less: Interest Profit before taxes Less: Taxes Net income available to common stockholders Less: Cash dividends Change in retained earnings $50,000 $30,000 $80,000 $120,000 10,000 $110,000 27.100 $82.900 31,800 $51,100 RPI, Inc. Balance Sheets for 12/31/18 and 12/31/19 Cash Marketable securities Accounts receivable Inventory Prepaid rent Total current assets Net plant and equipment Total assets Assets 2018 2019 $16,000 $17,000 7,000 7,200 42,000 38,000 50,000 93,000 1,200 1,100 $116,200 $156,300 286,000 290,000 $402,200 $446,300 Liabilities and Stockholders' Equity 2018 $48,000 16,000 6,000 $70,000 2019 $55,000 13,000 5,000 $73,000 Accounts payable Notes payable Accruals Total current liabilities Long-term debt Common stockholders' equity Total liabilities and equity $160,000 $172,200 $150,000 $223,300 $402,200 $446,300