Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden Bank requesting a $300,000 loan to strengthen the cash account and to pay certain pressing short-term obligations. The company's financial statements for the most recent two years are shown below. MODERN BUILDING SUPPLY Comparative Balance Sheet This Year Last Year Assets Current assets: Cash 90, 000 $ 200,080 Temporary investments 50,000 Accounts receivable, net 650,090 400,000 Inventory 1,300,080 800,000 Prepaid expenses 20, 000 20,080 Total current assets 2, 060,000 1, 470,000 Plant and equipment, net 1,940, 080 1, 830, 080 Total assets $ 4,000, 000 $ 3,300,080 Liabilities and Shareholders' Equity Liabilities: Current liabilities $1, 100,000 $ 600,000 Bonds payable, 12% 750, 006 750,080 Total liabilities 1, 850, 080 1, 350,080 Shareholders' equity: Preferred shares, 4,000, $4 no par 200,080 200,600 Common shares, 50, 090 500,000 500,080 Retained earnings 1, 450, 000 1, 250, 000 Total shareholders' equity 2, 150, 080 1, 950,080 Total liabilities and shareholders' equity $ 4,000,000 $ 3,300,080 MODERN BUILDING SUPPLY Comparative Income Statement and Reconciliation of Retained Earnings This Year Last Year Sales $7,000,080 $6,000, Bee Cost of goods sold 5, 400,000 4, 800,060 Gross margin 1, 600,000 1, 200, 090 Selling and administrative expenses 970,080 710,080 Operating income 630,080 490,080 Interest expense 90, 080 90,080 Net income before taxes 540,090 400,080 Income taxes (40%) 216,080 160,000 Net income 324,080 240,080 Dividends paid: Preferred dividends 16,080 16,000 Common dividends 108,000 60,080 Total dividends paid 124,080 76,000 Net income retained 200,000 164,000 Retained earnings, beginning of year 1, 250,080 1, 086,000 Retained earnings, end of year $1, 450,000 $1, 250,080During the past year. the company has expanded the number of lines that it carries In order to stimulate sales and increase prots. it has also moved aggressively to acqwre new customers. Sales terms are 2110. nl30. All sales are on account. Assume that the following ratios are typical of companies in the building supply Industry: current ratio 2.5 acid-test ratio 1 .2 Average collection period 18 days Average sale period so days Debt-to-equity ratio 9. 75 Times interest earned ratio 6.0 Return on total assets 18% Price-earnings ratio 9 e. Average sale perlod. (The Inventory at the beginning of last year totalled $720,000.) (Round your Intermediate calculations and final answer to 1 decimal place. Use 365 days In a year.) This year Last year Average sale period 49.6 days 71.0 days