Questions:

• 1) Calculate the key financial ratios for Seal-best, Inc., and plot trends in the firm's ratios against the industry averages.
• 2) What strengths and weaknesses are revealed by the ratio analysis?
• 3) What amount of internally-generated funds would be available for the retirement of the loan? If the bank were to grant the additional credit and extend the increased loan from a due date of February 1 to June 30, would the company be able to retire the loan on June 30? (Hint: To answer this question, consider profits and depreciation as well as the amount of inventories and receivables that would be carried if Seal-best's inventory turnover and average collection period (Days Sales Outstanding) were at industry average levels, that is, generating funds by reducing inventories and receivables to industry averages.)
• 4) In 2018, Seal-best's return on equity was 5.38 percent, versus 18 percent for the industry. Use the duPont equation to pinpoint the factors causing Seal-best to fall so far below the industry average.
• 5) On the basis of your financial analysis, do you believe that the bank should grant the additional loan and extend the entire line of credit to June 30?
• 6) If the credit extension is not made, what alternatives are open to Seal-best?
• 7) Under what circumstances is the validity of comparative ratio analysis questionable?