The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2013, follows. COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, 2013 Assets Current assets Cash $32,219 Accounts receivable 3,250 Merchandise Inventory 17,897 Prepaid expenses 6,300 $ 59,666 Property, plant, and equipment Furniture and fixtures $12,500 Accumulated depreciationfurniture and fixtures 1,250 11,250 Computer equipment 4,200 Accumulated depreciationcomputer equipment 600 3,600 Kitchen equipment 83,000 Accumulated depreciationkitchen equipment 8,000 75,000 89,850 Total assets $149,516 Liabilities and Stockholders Equity Current liabilities Accounts payable $ 5,848 Income tax payable 18,500 Dividends payable 700 Salaries payable 2,250 Interest payable 188 Note payablecurrent portion 4,000 $ 31,486 Long-term liabilities Note payablelong-term portion 6,000 Total liabilities 37,486 Stockholders equity Paid-in capital Preferred stock, 2,800 shares issued $14,000 Common stock, 25,930 shares issued, 25,180 outstanding 25,930 39,930 Retained earnings 72,600 Total paid-in capital and retained earnings 112,530 Less:Treasury stockcommon (750 shares), at cost (500) Total stockholders equity 112,030 Total liabilities and stockholders equity $149,516 COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2014 Sales revenue $462,500 Cost of goods sold 231,250 Gross profit 231,250 Operating expenses Salaries and wages expense $92,500 Depreciation expense 9,850 Other operating expenses 35,987 138,337 Income from operations 92,913 Other expenses Interest expense 413 Income before income tax 92,500 Income tax expense 18,500 Net income $ 74,000 Additional information: Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more kitchen equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,250. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate. Instructions (a) Calculate the following ratios. 1. Current ratio 6. Gross profit rate 2. Receivables turnover 7. Profit margin 3. Inventory turnover 8. Asset turnover 4. Debt to total assets 9. Return on assets 5. Times interest earned 10. Return on common stockholders' equity (b) Comment on your findings from part (a). (c) Based on your analysis in parts (a) and (b), do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Explain your reasoning. (d) What alternatives could Cookie & Coffee Creations consider instead of bank financing?