Prepare a report to the corporate lending department evaluating the liquidity and solvency of Bonanza. Provide a preliminary recommendation on whether the loan should be made. Provide support for your recommendation. What additional information would you want before reaching a final decision on the loan application? In your analysis, consider Bonanza's cash flow.

Chapter 13 - Exercise MGABO2 Bonanza Inc. Income Statement For the year ended July 31 Sales Cost of Sales Selling general and administrative expenses Depreciation Research and development Gain on sale of equipment Income tax expense Net Income 2022 $ 3,704,000 $ 2,077.944 $ 1,304,108 s 220,000 s 90,000 s (126,000) $ 26,000 $ 111.948 2021 $ 2,963,280 $ 2.199,620 s 1,341,516 s 204,000 $ 176,000 2020 $ 3.923,646 $ 2.150,158 312422 $ 12.191422 $ 196,000 S 250,000 $ $ 6,000 1963,856) 36, 144 S 2.000 S1,795,936) 13,066 Bonanza Ine. Statement of Financial Position As of July 31 Cash Receivables Inventory Prepaid expenses Current assets Capital assets (net of depreciation) Investment, at cost 2022 $ 11,158 $ 550.000 S 630.000 s 102,000 $ 1.293,158 $ 1,298,000 $ S 2,591.158 2021 $ $3,210 S 430,000 $ 420,000 S S6,000 $ 959,210 S 1,220,000 $ 150,000 $ 2,329.210 2020 $ 11,066 S 360,000 S 364,000 $ 162,000 S 897,066 $ 1,080,000 $ 150,000 $ 2.127,066 S $ $ S S $ $ S 2019 80,000 290,000 330,000 30,000 730,000 820,000 1.550,000 S 250,000 $ 184,000 S 94.000 $ 420,000 Bank loans Accounts payable and accrued linbilities Current liabilities Long term debt $ 700,000 S 950,000 350,000 $ 1,000,000 S 291,158 $ 2.591,158 S 616,000 S 800,000 $ 350,000 $ 1,000,000 $ 179,210 $ 2,329,210 S 540,000 $ 634,000 $ 350,000 $ 1,000,000 S 143.066 $ 2,127.066 S S 420,000 $ S 1,000,000 S 130,000 $ 1,550,000 Common Shares Retained Earnings Chapter 13 - Exercise 1 MGABO2 Bonanza Inc. (Bonanza) is a small manufacturer of home environmental products such as humidifiers , air cleaners and ionizers. Bonanza's products are sold in retail stores across Canada and in the United States. Bonanza's product line has been well received by customers over the years, although many products have not changed for many years. The president is concerned that the company cash position has been deteriorating in recent years and she has approached your organization for a significant loan to provide the company with additional working capital, as well as to purchase capital assets that need to be replaced. The president has provided income statements and statement of financial position (See Appendix 1) for the most recent years. Below are the additional information regarding the financial statement: The long term debt is due to be repaid in early 2024. The statement is owed to a large bank and is secured against certain capital assets. Capital asset purchases are paid in cash. Bonanza has $ 260,000 line of credit available from its bank. Bank loans represent the amount borrowed against the line of credit. All sales to customers and purchases of inventory are made on credit. Interest expense is included in selling, general and administrative expenses. Interest expense was $ 115,000 in 2022, $ 102,000 in 2021 and $ 48,000 in 2020. . . Required: Prepare a report to the corporate lending department evaluating the liquidity and solvency of Bonanza. Provide a preliminary recommendation on whether the loan should be made. Provide support for your recommendation. What additional information would you want before reaching a final decision on the loan application? In your analysis, consider Bonanza's cash flow