ABC Limited has requested a bank loan for a one-year period to refinance most of its notes payable. It would be supported by ABC Limited current assets. The following statements and industry averages accompanied the loan requests.

1. Prepare a statement of cash flow as of December 31, 20XX, for ABC Limited,

2. Complete a ratio analysis: profitability, asset utilization, debt utilization, and liquidity ratios.

3. Also prepare pro forma statements for 20XY on the basis of the same financial relationships as in 20XX, no new capital asset purchases, and a sales increase of 25 %. Include calculations if necessary.

4.Recommend support or rejection of the loan request.

Balance Sheets December 31 20XX 20XW Current assets: Cash... $ 1,300 $ 20,000 Accounts receivable.. 36,000 28,000 Inventories. 101,000 64,500 Total current assets. 138,300 112,500 Land.. 57,700 44,500 Buildings and equipment... 222,000 155,000 Less: Accumulated amortization...... 85,000 62,000 Total assets... $333,000 $250,000 Current liabilities: $ 48,770 $ 23,250 Accounts payable. Notes payable.. 104,500 37,750 Total current liabilities. 153,270 61,000 Long-term debt.... 51,000 64,000 Common stock. 70,000 70,000 58,730 55,000 Retained earnings. Total liabilities and equity... $333,000 $ 250,000 Income Statements Year Ended Dec. 31, , 20XX 20XW Sales........ $355,200 $277,500 213,120 166,500 142,080 111,000 Cost of goods sold... Contribution margin... Sales and administration expenses...... Amortization........... Operating income.. 82,140 74,370 23,000 10,000 36,940 26,630 Interest.... 14,200 6,800 Earnings before taxes. 22,740 19,830 Taxes..... 5,685 4,958 Net income.... $ 17,055 $ 14,872 Industry Averages Profit margin. 3.50% 4.00% 8.20% 38.00% Return on assets....... Return on equity.. Gross margin.. Receivables turnover.. Average collection period. Inventory turnover.... Capital asset turnover.... 9.73 times 37.51 days 2.50 times 2.08 times Total asset turnover...... 1.14 times Current ratio ......... 1.80 Quick ratio... 0.70 Debt to total assets....... 58.00% Times interest earned... 3.80 times