On January 1, 2017, ABC Company asked XYZ Bank for a loan The financial statements of ABC Company are given below. ABC Company Income Statement 2014 2015 2016 Sales 54.000.000 54,700,000 $6,000,000 Cost of goods sold 3,040,000 3,600,000 4.800,000 Gross profit 960,000 1,100,000 1.200,000 Selling and administrative expenses 430,000 440,000 $15,000 Operating profit 530,000 660,000 685.000 Interest expertise 160.000 150,000 170,000 Income before tax 370,000 510,000 515,000 Tax expense 148,000 204,000 206,000 Net income 222.000 306,000 309,000 ABC Company Balance Sheet Cash Accounts receivable Inventory Total current assets Fixed assets Total assets 2014 2015 2016 $50,000 $60,000 $80,000 500,000 550.000 750.000 620.000 690,000 800.000 1.170,000 1,300,000 1,630,000 1.230.000 1,300,000 1.340.000 2,400,000 2,600,000 2.970,000 Accounts payable 250.000 270.000 410.000 Bank loan 500.000 580,000 $80.000 Total current liabilities 750,000 $50,000 990,000 Bonds payable 1,000,000 900.000 1.100.000 Total liabilities 1,750,000 1,750,000 2,090,000 Common stock (25.000 shares) 250.000 250.000 250.000 Retained earnings 400,000 600,000 630,000 Total liabilities and equity 2,400,000 2,600,000 2.970,000 Note: The common shares are trading in the stock market for $100 each in 2014, S102 per share in 2015, S102.5 per share in 2016. Depends on financial data of ABC Company for 3 years and if you are a decision maker of XYZ Bank, should you offer loan to ABC Company? (Hint: Compute ratios: Current ratio (CR), Quick Ratio (QR), Average collection period (ACP), Debt ratio (DR), Debt to equity (DE), Interest coverage ratio or Time interest camed (TIE), Net profit margin (NPM), ROA, ROE, Total Asset Turnover (TATO) Price to earnings ratio (PE) and Market to book ratio (MB). Industry average in year 2016: CR OR ACP DR DE TIE NPM ROAROE TATO PE MB 1.5x0.8x36 days 45% 150% 4.5x8% 9% 25% 2.5x &x 4x