P2.28 Analyzing Financial Statement Information. The Fayette Corporation has applied to the Irving National Bank

for a $100,000 loan to purchase new equipment for its manufacturing operations. As part of the loan application,

the chief financial officer of Fayette submitted the following financial statement information:

2018 2019

Balance sheet

Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000 $ 50,000

Noncurrent assets. . . . . . . . . . . . . . . . . . . . . . . . . 152,000

175,000

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,000 225,000

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 25,000

Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 75,000 91,000

Shareholders equity . . . . . . . . . . . . . . . . . . . . . . . 100,000 109,000

Income statement

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $120,000 $123,500

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . (101,000)

(88,500)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,000 $ 35,000

Statement of cash flow

Cash flow from operating activities . . . . . . . . . . . . $ 32,000 $ 49,500

Cash flow from investing activities . . . . . . . . . . . . (40,000) (48,000)

Cash flow from financing activities . . . . . . . . . . . . 17,500

22,000

Change in cash. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,500 $ 23,500

Required

Analyze the financial statement information of The Fayette Corporation and indicate whether you believe that

the firms loan application should be approved. And, if so,why?