Joseph Berio is a loan officer with the First Bank of Tennessee. Red Brick, Inc., a major producer of masonry products, has applied for a short-term loan. Red Brick supplies building material throughout the southern states, with brick plants located in Tennessee, Alabama, Georgia, and Indiana. The firms income statement and balance sheet are given below. The third table presents both a ratio analysis of Red Bricks previous years financial statements and the industry averages of the ratios.

Red Brick Income Statement
(for the period ending December 12/31/20X1)
Sales	$	221,000,000
Cost of goods sold		155,000,000
Administrative expenses		31,000,000
Operating income	$	35,000,000
Interest expense		13,000,000
Taxes		400,000
Net income	$	21,600,000

Red Brick Balance Sheet as of 12/31/20X2
Assets				Liabilities and Stockholders Equity
Cash	$	700,000		Accounts payable	$	42,000,000
Accounts receivable		39,000,000	*	Notes payable		9,000,000
Inventory		84,600,000		Long-term debt		43,000,000
Plant and equipment		129,000,000		Stockholders equity		159,300,000
	$	253,300,000			$	253,300,000
*50% of sales are on credit.
Previous years inventory was $65,200,000.

	Companys Ratios	Industry
	(Previous Year)	Average
Current ratio	2.3:1	2.2:1
Quick ratio	0.7:1	0.8:1
Inventory turnover	4.6x	4.5x
Average collection period	79 days	54 days
Debt ratio (debt/total assets)	29%	41%
Times-interest-earned	2.7	3.6
Return on equity	17.4%	14.0%
Return on assets	10.3%	10.0%
Operating profit margin	12.2%	15.2%
Net profit margin	7.5%	8.7%