Question 3: As a bank manager you have an application from. Allen Company, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below: 2018 Allen Company Comparative Balance Sheet 2019 Assets Current assets: Cash SI 320,000 s Marketable securities Accounts receivable, net 900,000 Inventory 1,300,000 Prepaid expenses 80,000 420,000 100,000 600,000 800,000 60,000 2,600,000 3,100,000 Total current assets Plant and equipment, net Total assets 1,980,000 2,980,000 SI 5,700,000 S 4,960,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 10% SI 1,300,000 $ 1,200,000 920,000 1,000,000 Total liabilities 2,500,000 1,920,000 Stockholders equity: Common stock, Retained earnings 2,600,000 600,000 2,600,000 440,000 Total stockholders equity 3,200,000 3,040,000 Total liabilities and stockholders equity $5,700,000 $4,960,000 Allen Company Income Statement Sales (all on account) Cost of goods sold 2019 5,250,000 S 4,200,000 2018 4,160,000 3,300,000 1,050,000 530,000 860,000 520,000 Gross margin Selling and administrative expenses Net operating income Interest expense 520,000 120,000 340,000 100,000 400,000 120,000 Net income before taxes Income taxes (30%) Net income 240,000 72,000 280,000 168,000 You determine that the following ratios are typical of companies in Allen's industry: Current ratio 2.3 Acid-test ratio 1.2 Average collection period 31 days Days' Supply in Inventory 60 days Debt-to-equity ratio 0.65 Required: 1. For both 2018 and 2019, compute: a. Working capital b. The current ratio e. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of 2018 totaled $520,000.) e. The inventory turnover. (The inventory at the beginning of 2018 totaled $640,000.) f. The debt-to-equity ratio g. The gross margin percentage. 2. Should the company get the loan