steve sullivan has recently promoted as loan officer at the first national bank he has authority to issue loans up to $50,000

Steve Sullivan was recently promoted to loan officer at the First National Bank He has authority to issue loans up to 550,000 without approval from a higher bank official. This week two small companies, Handy Harvey, Inc. and Sheila's Fashions, Inc., have each submitted a proposal for a six-month $50,000 loan. In order to prepare a financial analysis of the two companies, Steve has obtained the information summarized below Handy Harvey, Inc. is a local luinber and home improvement company Because sales have increased so much during the past two years, Handy Harvey has had to raise additional working capital, especially as represented by receivables and inventory. The $50,000 loan is needed to assure the company of enough working capital for the next year. Handy Harvey began the year with total assets of $740.000 and stockholders' equity of $250,000, and during the past year the company had a net income of $40,000 on sales of $760,000. The company's current unclassified balance sheet appears as follows: Cash Accounts Receivable (net) Inventory Land Buildings (net) Equipment (net) Total Assets $ 30,000 150,000 250,000 50.000 250.000 70.000 $800.000 Liabilities and Stockholders' Equity Accounts Payable Note Payable (short-ter) Mortgage Payable Common Stock Retained Earnings Total Liabilities and Stockholders' Equity 5200.000 100.000 200,000 250.000 50.000 S800.000 Sheila's Fashions, Inc. has for three years been a successful clothing stores young professional women. The leased store is located in the downtown finary district, Sheila's loan proposal asks for $50,000 to pay for stocking a new line professional suits for working women during the coming season. A beginning of the year, the company had total assets of $200,000 and to stockholders' equity of $114,000. Over the past year, the company cameda income of $36.000 on sales of $480,000. The firm's unclassified balance sheet the current date appears as follows: Assets Cash Accounts Receivable (net) Inventory Prepaid Expenses Equipment (net) Total Assets $ 10.000 50,000 135,000 5.000 40.000 $240,000 Liabilities and Stockholders' Equity Accounts Accrued Liabilities Common Stock Retained Earnings Total Liabilities and Stockholders' Equity 5 80.000 10.00 50.000 100.00 $200.000 Required 1. Prepare a financial analysis of both companies liquidity before and after receiving the proposed loan. Also, compute profitability ratios before a after as appropriate. Write a brief summary of the effect of the proposed lor on each company's financial position 2. To which company do you suppose Steve would be most willing to make 550.000 loan? What are the positive and negative factors related to ad company's ability to pay back the loan in the next year? What other information of a financial or nonfinancial nature would be helpful before making a fin decision