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Question Completion Status: Moving to the next question prevents changes to this answer, Question 1 Question 1 of 2 Baker & Co. has applied for

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Question Completion Status: Moving to the next question prevents changes to this answer, Question 1 Question 1 of 2 Baker & Co. has applied for a loan from the Trust Us Bank to Inwest several potential opportunities. To evaluate the firm as a potential debtor, the bank would like to compare Baker Co. 20 points to the industry. The following are the financial statements given to Trust Us Bank Balance Sheet 12/31/13 Cash 12/31/14 $305 270 Accounts receivable 275 290 Inventory Current assets 600 580 1.100 1,140 Plant and equipment 1,700 1,940 Less: acc depr (500) Net plant and equipment (600) 1,200 Total assets 1,340 $2380 12.4RD Liabilities and Owners' Equity Accounts payable $150 $200 Notes payable Current liabilities 200 Bonds 500 500 Owners' equity Common stock 165 305 Paid-in-capital 775 775 Retained earnings 665 700 Total owners' equity 1.605 1.780 Total liabilities and owners' equity $2.380 Income Statement Sales (100% credit) $1,100 $1,330 Cost of goods sold 600 570 Gross profit 500 20 Operating expenses 200 Depreciation 320 340 Net operating income 64 57 Interest expense 256 283 Net income before taxes 87 Taxes $169 5187 Net Income $2.400 760 160 MacBook Air Gross profit Operating expenses Depreciation Net operating income Interest expense Net income before taxes Taxes Net income 500 20 160 320 64 256 87 $169 570 30 200 340 57 283 96 $187 Qs.Compute and analyze the following ratios.Should the bank give loan to baker and Co.justify your answer. Half mark for calculation and half mark for analysis: 2013 2014 Industry Norms Current ratio 5.0 Acid test ratio 3.0 Inventory turnover 2.2 Average collection period 90 days Debt ratio 33 Times interest earned 7.0 Total asset turnover .75 Fixed asset turnover 1.0 20% Operating profit margin Net profit margin 12% Return on total assets 9.00% Arial 3 (12pt) 111

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