Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The companys financial statements for the most recent two years follow:

Crowley Building Supply
Comparative Balance Sheets
	This Year		Last Year
Assets
Current assets:
Cash	$	56,500	$	141,500
Marketable securities		1,500		19,500
Accounts receivable, net		476,000		288,000
Inventory		948,560		588,530
Prepaid expenses		19,500		26,500
Total current assets		1,502,060		1,064,030
Plant and equipment, net		1,641,620		1,546,580
Total assets	$	3,143,680	$	2,610,610
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	806,000	$	445,000
Bonds payable, 8%		616,500		616,500
Total liabilities		1,422,500		1,061,500
Stockholders' equity:
Preferred stock, $25 par, 7%		318,000		318,000
Common stock, $10 par		510,000		510,000
Retained earnings		893,180		721,110
Total stockholders' equity		1,721,180		1,549,110
Total liabilities and stockholders' Equity	$	3,143,680	$	2,610,610

Crowley Building Supply
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,021,000	$	4,363,000
Cost of goods sold		3,870,200		3,434,200
Gross margin		1,150,800		928,800
Selling and administrative expenses		653,300		534,300
Net operating income		497,500		394,500
Interest expense		49,320		49,320
Net income before taxes		448,180		345,180
Income taxes (35%)		156,863		120,813
Net income		291,317		224,367
Dividends paid:
Preferred dividends		22,260		22,260
Common dividends		96,987		61,497
Total dividends paid		119,247		83,757
Net income retained		172,070		140,610
Retained earnings, beginning of year		721,110		580,500
Retained earnings, end of year	$	893,180	$	721,110

During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account.

Assume that the following ratios are typical of companies in the building supply industry:

Current ratio	2.5
Acid-test ratio	1.2
Average collection period	18	days
Average sale period	50	days
Debt-to-equity ratio	0.75
Times interest earned	6.0
Return on total assets	10	%
Price-earnings ratio	9

1.	Sycamore State Bank is uncertain whether the loan should be made. To assist it in making a decision, you have been asked to compute the following amounts and ratios for both this year and last year:

a.

Working capital.

	This year	Last year
Current ratio

b.

Current ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Current ratio

c.

Acid-test ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Acid-test ratio

d.

Average collection period. (The accounts receivable at the beginning of last year totaled $255,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)

	This year		Last year
Average collection period		days		days

e.

Average sale period. (The inventory at the beginning of last year totaled $508,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)

	This year		Last year
Average sale period		days		days

f.

Debt-to-equity ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Debt-to-equity ratio

g.

Times interest earned. (Round your answers to 1 decimal place.)

	This year	Last year
Times interest earned

2.	For both this year and last year:

a.

Present the balance sheet in common-size form. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Crowley Building Supply
Common-Size Balance Sheets
	This Year		Last Year
Assets
Current assets:
Cash		%		%
Marketable securities		%		%
Accounts receivable, net		%		%
Inventory		%		%
Prepaid expenses		%		%
Total current assets		%		%
Plant and equipment, net		%		%
Total assets		%		%
Liabilities and Stockholders' equity
Liabilities:
Current liabilities		%		%
Bonds payable, 8%		%		%
Total liabilities		%		%
Stockholders' equity:
Preferred stock, $25 par, 7%		%		%
Common stock, $10 par		%		%
Retained earnings		%		%
Total stockholders' equity		%		%
Total liabilities and equity		%		%

b.

Present the income statement in common-size form down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Crowley Building Supply
Common-Size Income Statements
	This Year		Last Year
Sales		%		%
Cost of goods sold		%		%
Gross margin		%		%
Selling and administrative expenses		%		%
Net operating income		%		%
Interest expense		%		%
Net income before taxes		%		%
Income taxes		%		%
Net income		%		%