Carlos Santana is the accountant and manager of the companies Mrate Distribuidora. He hires him as a financial analyst and advisor in the application for a loan. The company is requesting a five-year loan at a well-known bank in the community. The purpose of the loan is to cancel the payment - "notes to pay" of 2012 and to finance current projects, especially the inventory of merchandise. The following financial statements are presented below.

INCOME STATEMENTS: 2012 2011

SALES $16,665,000 $ 15,053,750

COST OF GOODS SOLD 9,270,000 7,987,000 GROSS PROFIT $ 7,395,000 $ 7,066,750

OPERATING EXPENSES:

FIXED CASH OPERATING EXPENSES $ 1,925,000 $ 1,725,000

VARIABLE OPERATING EXPENSES 1,840,000 1,788,000

DEPRECIATION 480,000 380,000 TOTAL OPERATING EXPENSES $ 4,245,000 $ 3,893,000

EARNINGS BEFORE INTEREST & TAXES $ 3,150,000 $ 3,173,750

INTEREST 1,332,500 1,315,000

EARNINGS BEFORE TAXES $ 1,817,500 $ 1,858,750

TAXES 727,000 743,500 NET INCOME $ 1,090,500 $ 1,115,250

LESS PREFERRED STOCKS DIVIDENDS 247,500 278,125

EARNINGS AVAILABLE FOR COMMON STOCKHOLDER $ 843,000 $ 837,125

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BALANCE SHEETS:

ASSETS 2012 2011

CASH $ 512,500 $ 410,250

ACCOUNTS RECEIVABLE 2,313,890 2,209,750

MARKETABLE SECURITIES 762,500 800,000

INVENTORIES 1,989,062 1,958,612

TOTAL CURRENT ASSETS $ 5,577,952 $ 5,378,612

LAND $ 6,934,547 $ 6,729,267

BUILDING & EQUIPMENT 3,500,000 3,500,000

LESS: ALLOWANCE FOR DEPRECIATION 1,250,000 1,150,000

TOTAL FIXED ASSETS (NET) $ 9,184,547 $ 9,079,267

TOTAL ASSETS $14,762,499 $14,457,879

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LIABILITIES

ACCOUNTS PAYABLE $ 2,875,000 $ 2,621,250

NOTES PAYABLE 1,427,500 1,275,000

MORTGAGE - CURRENT PORTION 187,500 252,255

TOTAL CURRENT LIABILITIES $ 4,490,000 $ 4,148,505

MORTGAGE DEBT- LONG TERM $ 3,913,125 $ 4,793,000

TOTAL LIABILITIES $ 8,403,125 $ 8,941,505

STOCKHOLDERS EQUITY

COMMON STOCKS $ 2,100,000 $2,100,000

PAID IN CAPITAL 966,374 966,374

RETAINED EARNINGS 3,293,000 2,450,000

TOTAL STOCKHOLDERS EQUITY $ 6,359,374 $ 5,516,374

TOTAL LIAB. & STOCKHOLDERS EQUITY $ 14,762,499 $ 14,457,879

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INDUSTRIES RATIOS: INDUSTRIES AVERAGE

CURRENT RATIO 1.50

ACID TEST RATIO 1.20

AVERAGE COLLECTION PERIOD 30 DAYS

INVENTORY TURN/OVER 10.20 TIMES

DEBTS TO TOTAL ASSETS 24.50%

LONG TERM DEBTS TO TOTAL CAPITALIZATION 33%

TIMES INTEREST EARNED 2.50 TIME

GROSS PROFIT MARGIN 26%

OPERATING PROFIT MARGIN 17%

NET PROFIT MARGIN 7.50%

TOTAL ASSETS TURN/OVER 2.14 TIMES

FIXED ASSETS TURN/OVER 1.40 TIMES

OPERATING EARNINGS RETURN ON INVESTMENT 11.4%

RETURN ON TOTAL ASSETS 4.00%

RETURN ON COMMON EQUITY 9.50%

REQUERIDO:

1. RATIO ANALYSIS: EXCELLENCE, GOOD, AVERAGE, POOR, and DEFICIENT (personal appraisal)

2. COMMON SIZE ANALYSIS

A. INCOME STATEMENTS

B. BALANCE SHEETS

3. FUND STATEMENT ANALYSIS

4. ANALYZE THE LOAN REQUEST. WOULD YOU GRANT THE LOAN? EXPLAIN.