You are a commercial credit officer at Bank. You have received the attached business plan from a client, who wants to borrow $100,000 for equipment upgrades.

STATEMENT OF INCOME AND RETAINED EARNINGS
	31/12/98	31/12/99	31/12/00	31/12/01	31/12/02
Sales	8,102,000	8,306,000	8,331,000	8,532,000	8,309,000
Cost of Sales
Opening Inventory	1,244,000	1,244,000	1,043,000	1,154,000	1,405,000
Purchases	5,009,000	4,945,000	5,771,000	6,100,000	6,065,000
Less: Closing Inventory	1,244,000	1,043,000	1,154,000	1,405,000	1,645,000
Cost of Goods Sold	5,009,000	5,146,000	5,660,000	5,849,000	5,825,000
Gross Profit	3,093,000	3,160,000	2,671,000	2,683,000	2,484,000
Expenses
Administrative expenses	1,979,000	1,946,000	1,838,000	1,815,000	1,767,000
Loan Interest	149,000	189,000	217,000	176,000	188,000
Depreciation	286,000	199,000	202,000	258,000	262,000
Total Expenses	2,414,000	2,334,000	2,257,000	2,249,000	2,217,000
Operating Profit	679,000	826,000	414,000	434,000	267,000
Income taxes	-223,000	-244,000	-131,000	-122,000	-83,000
Net Profit	456,000	582,000	283,000	312,000	184,000
Dividends	-24,000	-40,000	-47,000	0	0
Transfer to Retained Earnings	432,000	542,000	236,000	312,000	184,000
Retained Earnings (opening)	53,000	485,000	1,027,000	1,263,000	1,575,000
Retained Earnings (closing)	485,000	1,027,000	1,263,000	1,575,000	1,759,000

3. Financial Capacity (3)

a Satisfactory

b. Marginal

c.Unsatisfactory

Justify your decision here.