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Morksen Corp. has enjoyed modest success in penetrating the personal electronic devices market since it began operations a few years ago. A new line of devices introduced recently has been well received by customers. However, the company president, who is knowledgeable about electronics but not accounting, is concerned about the future of the company Although the company has a line of credit with the local bank, it currently needs cash to continue operations. The bank wants more information before it extends the company's credit line. The president has asked you, as the company's chief accountant, to evaluate the company's performance by using appropriate financial statement analysis, and to recommend possible courses of action for the company. In particular, the president wants to know how the company can obtain additional cash Summary financial statements for the past three years are available below. MORKSEN CORP. Consolidated Statements of Earnings For the Years Ended December 31, (in thousands of dollars) Year 8 Sales $64,000 Cost of sales 50,000 Gross profit 14,000 Operating expenses before interest and income taxes 8,000 Interest expense 1,780 Earnings before income taxes Income tax expense 1,900 Net earnings $ 2,320 Year 7 $56,000 43,000 13,000 7,400 1,220 4,380 2,040 $ 2,340 Year 6 $46,800 36,000 10,800 6,620 4,220 4,180 1,940 $ 2,240 Year 7 Year 6 37 $ 480 740 8,400 10,060 19, 680 $ 1,000 740 5,140 7,220 14,100 MORKSEN CORP. Consolidated Statements of Financial Position At December 31, (in thousands of dollars) Year 8 Assets Current assets Cash $ 380 Short-term investments 740 Accounts receivable 10,880 Merchandise inventory 16,660 Total current assets 28,660 Property, plant, and equipment Land 4,000 Buildings and equipment 26,000 30,000 Less: Accumulated depreciation 8,940 Net property, plant, and equipment 21,060 Total assets $49,720 Liabilities and Shareholders' Equity Current liabilities Bank loan $16,500 Accounts payable 6,000 Other liabilities 1,640 Income tax payable 960 Total current liabilities 25, 100 Shareholders' equity Common shares 20,000 Retained earnings 4,140 Other comprehensive income 480 Total shareholders' equity 24,620 Total liabilities and shareholders' equity $49,720 4,000 26,000 30,000 7,440 22,560 $42, 240 2,000 18,000 20,000 5,760 14,240 $28, 340 $11,400 4,300 1,600 1,040 18,340 $ 2,880 1,500 1,000 5,380 20,000 3,520 380 23,900 $42,240 20,000 2,640 320 22,960 $28,340