Harrod's Sporting Goods Jim Harrod knew that service, above all, was important to his customers. Jim and Becky Harrod had opened their first store in Medicine Hat, Alberta eighteen years ago. Harrod's carried a full line of sporting goods including everything from baseball bats and uniforms to fishing gear and hunting equipment. By the year 20XX, there were twelve Harrod stores producing $5 million in total sales and generating a profit of over $200,000 per year. On the positive side, there was an increasing demand for sporting goods as leisure time activities continued to grow. Also, Western Canada, where all twelve stores were located, was experiencing moderate growth. Finally, there had been a sharp upturn in the last decade for women's sporting goods equipment. This was particularly true of softball uniforms for high school, college, and city league women's teams. Jim's wife Becky was one of the top softball players in the city of Medicine Hat, and her extensive contacts throughout the province help to bring in new business. While Alberta is primarily known as a hockey province, Medicine Hat hosts a Western Canada baseball world series each year in June and this generates a lot of interest in baseball (and softball as well). Jim, who had been an offensive tackle at the University of Alberta took great pride in his stores as well as his prior university affiliation. He and Becky (also a University of Alberta graduate) contributed $2,000 annually to the University of Alberta athletic program. The growth in the stores was the good news for Jim and Becky. The less than good news was the intense competition that they faced. Not only were they forced to compete with nationally established sporting goods stores such as Sport Chek and National Sports, but Walmart also represented intense competition for the sporting goods dollar. The national stores were extremely competitive in terms of pricing. However, Jim, Becky and their employees offered great personal service, and they hoped this would allow them to continue with their specialty niche.

Marrod's Spertiez Cneds Figt Figt Block 12ce Copyright 02021 MeGraw Hill Education Jim Harrod knew that service, above all, was important to his customers. Jim and Becky Harrod had opened their first store in Medicine Hat, Alberta eighteen years ago. Harrod's carried a full line of sporting goods including everything from baseball bats and uniforms to fishing gear and hunting equipment. By the year 20XX, there were twelve Harrod stores producing $5 million in total sales and generating a profit of over $200,000 per year. On the positive side, there was an increasing demand for sporting goods as leisure time activities continued to grow. Also, Western Canada, where all twelve stores were located, was experiencing moderate growth. Finally, there had been a sharp upturn in the last decade for women's sporting goods equipment. This was particularly true of softball uniforms for high school, college, and city league women's teams. Jim's wife Becky was one of the top softball players in the city of Medicine Hat, and her extensive contacts throughout the province help to bring in new business. While Alberta is primarily known as a hockey province, Medicine Hat hosts a Western Canada baseball world series each year in June and this generates a lot of interest in baseball (and softball as well). Jim, who had been an offensive tackle at the University of Alberta took great pride in his stores as well as his prior university affiliation. He and Becky (also a University of Alberta graduate) contributed $2,000 annually to the University of Alberta athletic program. The growth in the stores was the good news for Jim and Becky. The less than good news was the intense competition that they faced. Not only were they forced to compete with nationally established sporting goods stores such as Sport Chek and National Sports, but Walmart also represented intense competition for the sporting goods dollar. The national stores were extremely competitive in terms of pricing. However, Jim, Becky and their employees offered great personal service, and they hoped this would allow them to continue with their specialty niche. In January of 20XY, Becky, who served as the company's chief financial officer, walked into Jim's office and said, "I"ve had it with the National Bank here in Medicine Hat. It is willing to renew our loan and line of credit, but the bank wants to charge us 2%/2 percent over prime. The prime rate is the rate at which banks make loans to their most creditworthy customers. It was 4.75 percent at the time Becky had visited the bank, so that the total rate on the loan would be 7.25 pereent. It was not so much the total rate that Becky objected to, as the fact that Harrod's was being asked to pay 2%/2 percent over prime. She felt that Harrod's was a strong enough company that 1 percent over prime should be all that the bank required. Her banker told her he would review the firm's financial statements with her next week and reconsider the premium Harrod's was being asked to pay over prime. While Becky knew the bank "erunched all the numbers," she decided to do some additional financial analysis on her own. She had a bachelor's degree in finance with a 3.3GPA. She began by examining Figures 1,2 , and 3. takea plase evere the twow-year eme pariod. Since it was a tas-dobutible item, we nue fira meltigly by (1-am year 65 (1) tax rane) extrandinury bas fratt set income Initially repanted fipure \}) 5300118 Afrutied net income sitosis pobiability ratios for 200XX (inchule parts a ind 5 for ration 2 and 3 ) Required have biken place ever the threo-ycar tine period inefer tack as the deba in Oantion t for JuXV and 20x ) a mepiemental minerial in your anabaic. For 20XX. overpate raties 3-4a, 5-5a and 3-7a as descrbed is the lest siles we ce ovesr werma you think that lecky. Juend has a lepitimate complaial abvel being chatpod 2W, porcent over prime indead of ote porcent aver prime? justyonent