D. WIL LUULIUSTUMS LA you EYK13-3. Business Decision Problem Crescent Paints, Inc., a paint manufacturer, has been in business for five years. The company has had modest profits and has experienced few operating difficulties until this year, 2019, when president Alice Becknell discussed her company's working capital problems with you, a loan officer at Granite Bank. Becknell explained that expanding her firm hae created difficulties in meeting obligations when they come due and in taking advantage of cash discounts offered by manufacturers for the timely payment of the company's accounts payable She would like to borrow $50,000 from Granite Bank. At your request, Becknell submits the fol- lowing financial data for the past two years: 2019 Sales revenue......... Cost of goods sold ... Net income ............................. Dividends ......... December 31, 2017, data. ........ Total assets Accounts receivable (net). .... Inventory................... $2,000,000 1,320,000 42,000 22,000 2018 $1,750,000 1,170,000 33,600 18,000 .. 1,100,000 205,000 350,000 CRESCENT PAINTS, INC. Balance Sheets Dec. 31, 2019 Dec. 31, 2018 $ 31,000 345,000 525,000 11.000 912,000 483.000 $1,395,000 $ 50,000 250,000 425,000 6.000 731,000 444.000 $ 1,175,000 Assets Cash.... Accounts receivable (net). ... Inventory..... Prepaid expenses.......... Total current assets. . . . . . . . . . Plant assets (net) .......... Total assets Liabilities and Stockholders' Equity Notes payable-banks.. Accounts payable...... Accrued liabilities .... Total current liabilities. ... 10% mortgage payable.... Total liabilities . . . . . . . Common stock .......... Retained earnings ............ Total stockholders' equity . . . . . . . . . . Total liabilities and stockholders' equity $ 100,000 244,000 96.000 440,000 190,000 630,000 665,000 100.000 765,000 $1,395,000 $ 35,000 190,000 85,000 310,000 250,000 560,000 535,000 80.000 615,000 $1,175,000 Calculate the following items for both years from the given data and then compare them with the median ratios for paint manufacturers provided by a commercial credit firm: Median Ratios for Paint Manufacturers 2.5 1.3 8.1 44.9 days Current ratio ........ Quick ratio .... Accounts receivable turnover . . . . . . . ... Average collection period. ... Inventory turnover. . . . . . . . . . . . . . . . . . . Debt-to-equity ratio. ................ Return on assets . . . . . . . . . . . . . . Return on sales .................. 4.9 0.78 4.8% 2.4% Required Based on your analysis, decide whether and under what circumstances you would grant Becknell's request for a loan. Explain the reasons for your decision
