Questions:

1.Calculate Gillian Pool and Spa Supplies average annual compound growth rate of sales, and analyze its earnings performance for the past five years.

2.In order to shed some light on the firms financial condition, which statements should Denny analyze, and which measures/calculations should he use to compile a detailed report? Please explain why.

3.Realizing that comparison with an appropriate benchmark is a key component of comprehensive ratio analysis, how should Denny go about finding a suitable benchmark?

4.While attending his MBA finance class, Denny had learned that doing a common size analysis and a DuPont analysis are very useful first steps when analyzing a companys health. Using the five-year financial statements, help Denny perform such analyses. Comment on the findings.

5.Analyze Gillian Pools liquidity, asset utilization, long-term solvency, and profitability ratios. What arguments would have to be made to convince the bank that it should grant Gillian Pool & Spa Supplies the loan?

6.If you were the commercial loan officer Andy approached for a short-term loan of $50,000, what would your decision be? Why?

7.What recommendations should Denny make to Andy for improvement, if any? (Please show the excel calculations)

Table 1 Gillian Pool & Spa Supplies Balance Sheet 2012 2013 2014 2011 2015 $309,099 $75,948 $18,425 12,000 20,000 77,653 90,078 270,000 $591,099 $250,000 500,000 $595,948 $500,000 520,000 $626,480 $500,000 560,000 $668,503 $500,000 -50,000 -100,000 -150,000 - 200,000 ASSETS Cash and $155,000 Marketable Securities Accounts 10,000 Receivable Inventory 250,000 Current Assets $415,000 Land, $250,000 Buildings, Plant, and Equipment Accumulated -25,000 Depreciation Net Fixed $225,000 Assets Total Assets $640,000 LIABILITIES AND EQUITIES Short-Term $50,000 Bank Loans Accounts 10,000 Payable Accruals 5,000 Current $65,000 Liabilities $200,000 Sun $400,000 $350,000 $300,000 $791,099 $995.948 $976,480 $968,503 $145,000 $140,000 $148,000 $148,000 10,506 19,998 15,995 16,795 5,100 $160,606 7.331 $167,329 9.301 $173,296 11,626 $176,421 598,000 $196,000 $190,000 $183,000 Long-Term $63,366 Bank Loans Mortgage 175,000 Long-Term $238,366 Debt Total Liabilities $303,366 173,000 5271,000 271,000 $467,000 268,000 $458,000 264,000 $447,000 $431,606 $634,329 $631,296 $623.421 $320,000 $320,000 $320,000 $320,000 Common Stock $320,000 (100,000 shares) Retained 16,634 Earnings Total Equity $336,634 39,493 41,619 25,184 25,082 5359,493 $361,619 $345,184 345,082 Total Liabilities $640,000 and Equity $791,099 $995,948 $976,480 $968,503 Table 2 Gillian Pool & Spa Supplies Income Statements 2013 2014 2011 2012 2015 $900,000 729,000 $982,500 801,900 $1,170,000 962,280 $1,310,400 1,100,736 $1,520,064 1,305,000 $171,000 $45,000 $180,600 $58,950 $207,720 $64,350 $209,664 $72,072 $215,064 $91,204 37,500 3,041 40,000 3,557 50,000 4,680 50,000 14,414 50,000 22,801 Net Sales Cost of Goods Sold Gross Profit Admin and Selling Exp Depreciation Miscellaneous Expenses Total Operating Exp EBIT Interest on ST Loans Interest on LT Loans Interest on Mortgage $85,541 $102,507 $119,030 $136,486 $164,005 $85,460 $9,600 $78,093 $9,600 $88,690 $9,600 $73,178 $17,760 $51,059 $17,760 5,400 5,400 5,400 13,500 16,470 16,000 13,840 12,240 21,440 21,120 Total Interest $31,000 $28,840 $27,240 $52,700 $55,350 $54,460 $49,253 $61,450 Before-Tax Earnings $20,478 ($4,291) 21,784 $32,676 0 19,701 $29,552 24,580 $36,870 8,191 $12,287 -1,716 ($2,574) Taxes Net Income Dividends on Stock Additions to Retained Earnings $32,676 $29,552 $36,870 $12,287 ($2,574) Table 1 Gillian Pool & Spa Supplies Balance Sheet 2012 2013 2014 2011 2015 $309,099 $75,948 $18,425 12,000 20,000 77,653 90,078 270,000 $591,099 $250,000 500,000 $595,948 $500,000 520,000 $626,480 $500,000 560,000 $668,503 $500,000 -50,000 -100,000 -150,000 - 200,000 ASSETS Cash and $155,000 Marketable Securities Accounts 10,000 Receivable Inventory 250,000 Current Assets $415,000 Land, $250,000 Buildings, Plant, and Equipment Accumulated -25,000 Depreciation Net Fixed $225,000 Assets Total Assets $640,000 LIABILITIES AND EQUITIES Short-Term $50,000 Bank Loans Accounts 10,000 Payable Accruals 5,000 Current $65,000 Liabilities $200,000 Sun $400,000 $350,000 $300,000 $791,099 $995.948 $976,480 $968,503 $145,000 $140,000 $148,000 $148,000 10,506 19,998 15,995 16,795 5,100 $160,606 7.331 $167,329 9.301 $173,296 11,626 $176,421 598,000 $196,000 $190,000 $183,000 Long-Term $63,366 Bank Loans Mortgage 175,000 Long-Term $238,366 Debt Total Liabilities $303,366 173,000 5271,000 271,000 $467,000 268,000 $458,000 264,000 $447,000 $431,606 $634,329 $631,296 $623.421 $320,000 $320,000 $320,000 $320,000 Common Stock $320,000 (100,000 shares) Retained 16,634 Earnings Total Equity $336,634 39,493 41,619 25,184 25,082 5359,493 $361,619 $345,184 345,082 Total Liabilities $640,000 and Equity $791,099 $995,948 $976,480 $968,503 Table 2 Gillian Pool & Spa Supplies Income Statements 2013 2014 2011 2012 2015 $900,000 729,000 $982,500 801,900 $1,170,000 962,280 $1,310,400 1,100,736 $1,520,064 1,305,000 $171,000 $45,000 $180,600 $58,950 $207,720 $64,350 $209,664 $72,072 $215,064 $91,204 37,500 3,041 40,000 3,557 50,000 4,680 50,000 14,414 50,000 22,801 Net Sales Cost of Goods Sold Gross Profit Admin and Selling Exp Depreciation Miscellaneous Expenses Total Operating Exp EBIT Interest on ST Loans Interest on LT Loans Interest on Mortgage $85,541 $102,507 $119,030 $136,486 $164,005 $85,460 $9,600 $78,093 $9,600 $88,690 $9,600 $73,178 $17,760 $51,059 $17,760 5,400 5,400 5,400 13,500 16,470 16,000 13,840 12,240 21,440 21,120 Total Interest $31,000 $28,840 $27,240 $52,700 $55,350 $54,460 $49,253 $61,450 Before-Tax Earnings $20,478 ($4,291) 21,784 $32,676 0 19,701 $29,552 24,580 $36,870 8,191 $12,287 -1,716 ($2,574) Taxes Net Income Dividends on Stock Additions to Retained Earnings $32,676 $29,552 $36,870 $12,287 ($2,574)