Financial Statement Analysis Modern Building Supply, Inc. Modern Building Supply sells various building materials to retail outlets. Listed below are its financial statements for the past two years.

The company, MBS, has just approached State Bank requesting a $300,000 short-term loan for working capital purposes. Would you make the loan? Use the information provided above to help make your decision. Use as many ratios as needed.

This Year Last Year $ 90 $ 650 1,160 30 1,930 2,000 3,930 $ 200 501 500 900 201 1,670 1,830 3,500 $ Modern Building Supply Comparative Balance Sheets (amounts in 000's) Assets Current Assets: Cash Short-term Investments Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment, Net Total Assets Liabilities and SIE Liabilities: Accounts Payable Wages Payable Other Payables Current Liabilities Notes Payable (12% annual interest) Total Liabilities Stockholders' Equity Common Stock Retained Earnings Total Equity Total Liab. And Equity 660 70 230 960 750 520 501 1301 700 750 $ $ 1,710 1,450 700 1,520 2,220 3,930 $ 7001 1,350 2,050 3,500 $ Comparative Income Statements Sales Less Cost of Goods Sold Gross Profit Less Operating Expenses Operating Income This Year Last Year $ 7,000 $ 6,000 5,530 4,800 1,4701 1,200 930 7101 540 490 Comparative Income Statements This Year Last Year Sales $ 7,000 $ 6,000 Less Cost of Goods Sold 5,530 4,800 Gross Profit 1,470 1,200 Less Operating Expenses 930 7101 Operating Income 540 4901 Less Interest Expense 90 90 Income Before Taxes 450 400 Income Tax Expense (40%) $ 180 $ 1601 Net Income After Taxes $ 270 $ 240 (you do NOT need to include this sheet with the solution sheets you turn in to Building supply INDUSTRY ratios follow: Current Ratio 2.5 to 1 Quick Ratio Average Age of Receivables Inventory turnover in days Debt to Equity Ratio Times Interest Earned Return on Total Assets Price-earnings ratio Return on Sales (profit margin) 1.2 to 1 30 days 50 days 0.75 to 1 5.0 times 10% 9 4%