Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The companys financial statements for the most recent two years follow:

Modern Building Supply
Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	68,000	$	142,000
Marketable securities		0		14,000
Accounts receivable, net		461,000		287,000
Inventory		936,000		596,000
Prepaid expenses		19,000		24,000
Total current assets		1,484,000		1,063,000
Plant and equipment, net		1,744,480		1,664,970
Total assets	$	3,228,480	$	2,727,970
Liabilities and Stockholders Equity
Liabilities:
Current liabilities	$	805,000	$	437,000
Bonds payable, 11%		605,000		605,000
Total liabilities		1,410,000		1,042,000
Stockholders equity:
Preferred stock, $25 par, 6%		492,500		492,500
Common stock, $10 par		519,000		519,000
Retained earnings		806,980		674,470
Total stockholders equity		1,818,480		1,685,970
Total liabilities and stockholders equity	$	3,228,480	$	2,727,970

Modern Building Supply
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,007,000	$	4,370,000
Cost of goods sold		3,863,000		3,445,000
Gross margin		1,144,000		925,000
Selling and administrative expenses		643,000		542,000
Net operating income		501,000		383,000
Interest expense		66,550		66,550
Net income before taxes		434,450		316,450
Income taxes (40%)		173,780		126,580
Net income		260,670		189,870
Dividends paid:
Preferred dividends		29,550		29,550
Common dividends		98,610		77,850
Total dividends paid		128,160		107,400
Net income retained		132,510		82,470
Retained earnings, beginning of year		674,470		592,000
Retained earnings, end of year	$	806,980	$	674,470

During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. 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	50	days
Debt-to-equity ratio	0.75
Times interest earned	6.0
Return on total assets	10	%
Price-earnings ratio	9

Required:

1.	Linden State Bank is uncertain whether the loan should be made. To assist it in making a decision, you have been asked to compute the following amounts and ratios for both this year and last year:

a.	Working capital. (Omit the "$" sign in your response.)

	This year	Last year
Working capital	$	$

b.	Current ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Current ratio

c.	Acid-test ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Acid-test ratio

d.	Average collection period. (The accounts receivable at the beginning of last year totaled $241,000.) (Do not round intermediate calculations. Round your answers to 1 decimal place. Use 365 days in a year.)

	This year	Last year
Average collection period	days	days

e.	Average sale period. (The inventory at the beginning of last year totaled $517,000.) (Do not round intermediate calculations. Round your answers to 1 decimal place. Use 365 days in a year.)

	This year	Last year
Average sale period	days	days

f.	Debt-to-equity ratio. (Round your answers to 2 decimal places.)

	This year	Last year
Debt-to-equity ratio

g.	Times interest earned. (Round your answers to 1 decimal place.)

	This year	Last year
Times interest earned

2.	For both this year and last year:

a.	Present the balance sheet in common-size form. (Round your answers to 1 decimal place. Leave no cells blank - be certain to enter "0" wherever required. Omit the "%" sign in your response.)

Modern Building Supply
Common-Size Balance Sheets
	This Year	Last Year
Assets
Current assets:
Cash	%	%
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Plant and equipment, net
Total assets	%	%
Liabilities and Stockholders' equity
Liabilities:
Current liabilities	%	%
Bonds payable, 11%
Total liabilities
Stockholders' equity:
Preferred stock, $25 par, 6%
Common stock, $10 par
Retained earnings
Total stockholders' equity
Total liabilities and equity	%	%

b.	Present the income statement in common-size form down through net income. (Input all amounts as positive values. Round your answers to 1 decimal place. Omit the "%" sign in your response.)

Modern Building Supply
Common-Size Income Statements
	This Year	Last Year
Sales	%	%
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
Income taxes
Net income	%	%