Balance Sheet 2003 2011 2012 2013 Cash 34000 51000 23800 17000 Accounts Receivable 136000 204000 231200 323000 Inventory 170000 255000 425000 688500 Total Current Assets 340000 510000 680000 1028500 Land and Building 51000 40800 108800 102000 Machinery 68000 125800 98600 85000 Other Fixed Assets 40800 23800 6800 5100 Total Fixed Assets 159800 190400 214200 192100 Total Assets 499800 700400 894200 1220600 Notes Payable, bank --- --- 85000 238000 Accounts and Notes Payable 74800 81600 129200 255000 Accruals 34000 40800 47600 64600 Total Current Liabilities 108800 122400 261800 557600 Mortgage - Long-term liab. 51000 37400 34000 30600 Total Liabilities 159800 159800 295800 588200 Common Stock 306000 306000 306000 306000 Retained Earnings 34000 234600 292400 326400 Total S.Equity 340000 540600 598400 632400 Total Liabilities & Equity 499800 700400 894200 1220600 Income Statement 2011 2012 2013 Net Sales 2210000 2295000 2380000 Cost of Goods Sold 1768000 1836000 1904000 Gross Operating Profit 442000 459000 476000 General, Administrative, Selling 170000 187000 204000 Depreciation 68000 85000 102000 Miscellaneous 34000 71400 102000 EBT 170000 115600 68000 Taxes (50%) 85000 57800 34000 Net Income $85,000 $57,800 $34,000 Industry Quick Ratio 1 Current Ratio 2.7 Inventory Turnover - times 7 Inventory Period - days 52.1 Average Collection Period - days 32 Fixed Asset Turnover - times 13 Total Asset Turnover - times 2.6 Return on Total Assets 9.0% Return on Equity 18.0% Debt (Total) Ratio 50.0% Profit Margin on Sales 3.5% Internal growth rate Sustainable growth rate

Calculate the key financial ratios for Seal-best, Inc., and plot trends in the firm's ratios against the industry averages. 2) What strengths and weaknesses are revealed by the ratio analysis? 3) What amount of internally-generated funds would be available for the retirement of the loan? If the bank were to grant the additional credit and extend the increased loan from a due date of February 1, 2014 to June 30, 2014, would the company be able to retire the loan on June 30? (Hint: To answer this question, consider profits and depreciation as well as the amount of inventories and receivables that would be carried if Seal-best's inventory turnover and average collection period (Days Sales Outstanding) were at industry average levels, that is, generating funds by reducing inventories and receivables to industry averages.) 4) In 2013, Seal-best's return on equity was 5.38 percent, versus 18 percent for the industry. Use the duPont equation to pinpoint the factors causing Seal-best to fall so far below the industry average. 5) On the basis of your financial analysis, do you believe that the bank should grant the additional loan and extend the entire line of credit to June 30, 2014? 6) If the credit extension is not made, what alternatives are open to Seal-best? 7) Under what circumstances is the validity of comparative ratio analysis questionable?