(Financial analysis) The T.P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firms sales were $600,000 for the year just ended, and its total assets exceeded $400,000. The company was started by Mr. Jarmon just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has decided to seek a line of credit totaling $80,000 from the firms bank. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firms suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Vehlim wants to use the line of credit to replace a large portion of the firms payables during the summer, which is the firms peak seasonal sales period.

The firms two recent balance sheets were presented to the bank in support of its loan request. In addition, the firms income statement for the year just ended was provided. These statements are found in the following tables:

Jan Fama, associate credit analyst for the Merchants National Bank of Midland, Michigan, was assigned the task of analyzing Jarmons loan request.

a. Calculate the financial ratios for 2013 corresponding to the industry norms provided as follows:

b. Which of the ratios reported in the industry norms do you feel should be most crucial in determining whether the bank should extend the line of credit?

c. Prepare Jarmons statement of cash flows for the year ended December 31^st, 2013. Interpret your findings.

d. Use the information provided by the financial ratios and the cash flow statement to decide if you would support making the loan.

T. P. Jarmon Company, Balance Sheet for 12/31/2012 and 12/31/2013 2012 15,000 Cash Marketable securities 6,000 Accounts receivable 42,000 51,000 Inventory Prepaid rent 1,200 Total current assets $115,200 Net plant and equipment 286,000 $401 200 Total assets Accounts payable 48,000 Notes payable 15,000 6.000 Accruals 69,000 Total current liabilities Long-term debt 160,000 Common stockholders' equity 172,200 $401,200 Total liabilities and equity 2013 14,000 6,200 33,000 84,000 1,100 $138,300 270.000 $408,300 57,000 13,000 5,000 75,000 150,000 183.300 $408,300