As a bank manager you have an application from. Allen Company, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below: 2018 Allen Company Comparative Balance Sheet 2019 Assets Current assets: Cash S 320,000 Marketable securities 0 Accounts receivable, net 900,000 Inventory 1,300,000 Prepaid expenses 80,000 S 420,000 100,000 600,000 800,000 60,000 Total current assets Plant and equipment, net 2,600,000 3,100,000 1,980,000 2,980,000 Total assets $ 5,700,000 S 4,960,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 10% 1,300,000 $920,000 1,200,000 1,000,000 Total liabilities 2,500,000 1,920,000 Stockholders equity: Common stock, Retained earnings 2,600,000 600,000 2,600,000 440,000 Total stockholders equity 3,200,000 3,040,000 Total liabilities and stockholders equity $ 5,700,000 4,960,000 Allen Company Income Statement Sales (all on account) Cost of goods sold 2019 2018 5,250,000 S 4,160,000 4,200,000 3,300,000 Gross margin Selling and administrative expenses 1,050,000 530,000 860,000 520,000 Net operating income Interest expense 520,000 120,000 340,000 100,000 Net income before taxes Income taxes (30%) 400,000 120,000 240,000 72,000 Net income 280,000 168,000 You determine that the following ratios are typical of companies in Allen's industry: Current ratio 2.3 1.2 31 days Acid-test ratio Average collection period Days' Supply in Inventory Debt-to-equity ratio 60 days 0.65 Required: 1. For both 2018 and 2019, compute: a. Working capital. b. The current ratio. c. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of 2018 totaled $520,000.) e. The inventory turnover. (The inventory at the beginning of 2018 totaled $640,000.) f. The debt-to-equity ratio. g. The gross margin percentage. 2. Should the company get the loan