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	$	59,000	$	130,000
Marketable securities		0		17,000
Accounts receivable, net		462,000		286,000
Inventory		942,000		584,000
Prepaid expenses		17,000		24,000
Total current assets		1,480,000		1,041,000
Plant and equipment, net		1,772,280		1,677,185
Total assets	$	3,252,280	$	2,718,185
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	819,000	$	439,000
Bonds payable, 10%		617,000		617,000
Total liabilities		1,436,000		1,056,000
Stockholders' equity:
Preferred stock, $25 par, 7%		475,000		475,000
Common stock, $10 par		504,000		504,000
Retained earnings		837,280		683,185
Total stockholders' equity		1,816,280		1,662,185
Total liabilities and stockholders' equity	$	3,252,280	$	2,718,185

Modern Building Supply
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,011,000	$	4,351,000
Cost of goods sold		3,860,000		3,449,000
Gross margin		1,151,000		902,000
Selling and administrative expenses		646,000		528,000
Net operating income		505,000		374,000
Interest expense		61,700		61,700
Net income before taxes		443,300		312,300
Income taxes (35%)		155,155		109,305
Net income		288,145		202,995
Dividends paid:
Preferred dividends		33,250		33,250
Common dividends		100,800		70,560
Total dividends paid		134,050		103,810
Net income retained		154,095		99,185
Retained earnings, beginning of year		683,185		584,000
Retained earnings, end of year	$	837,280	$	683,185

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.

	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 $245,000.)(Do not round intermediate calculations. Round your final 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 $513,000.) (Do not round intermediate calculations. Round your final 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. Due to rounding, figures may not fully reconcile down a column.)

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, 10%	%	%
Total liabilities	%	%
Stockholders' equity:
Preferred stock, $25 par, 7%	%	%
Common stock, $10 par	%	%
Retained earnings	%	%
Total stockholders' equity	%	%
Total liabilities and stockholders' 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. Due to rounding, figures may not fully reconcile down a column.)

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	%	%