You have just been hired as a loan officer at Westmount-Bank-Your supervisor has given you a file containing a request from Hi Company, a manufacturer of computer components, for a $2,021,000 five-year loan. Financial statement data on the company for the past two years are given below: HILL COMPANY Comparative Balance Sheet This Year Last Year $ 242,400 $316,500 B 75,800 682,200 454,800 985,400 686,488 68,640 45,488 Assets Current assets: Cash Temporary investments Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Shareholders' Equity Liabilities: Current Liabilities Bonds payable, 10% Total liabilities Shareholders' equity: Preferred shares, 20,000, $2.60 no par value Common shares, 50,000 Retained earnings Total shareholders equity Total liabilities and shareholders' equity 1,978,600 1,408,288 2,346,600 2,254,888 $4,317,200 $3,753,000 $ 988,904 $ 696,200 907,200 756,000 1,896,104 460,000 1,528,000 1,452,200 450,000 1,520,000 320,888 441,096 2,421,096 2,300,000 $4,317,200 $3,753,000 Sales (all on account) Cost of goods sold Gross margin HILL COMPANY Comparative Income Statement and Reconciliation of Retained Earnings Selling and administrative expenses Operating income Interest expense Net income before taxes. WEL DILURE DEI L Income taxes (38) Net income Dividends paid: Preferred shares Common shares Total dividends paid Net income retained Retained earnings, beginning of year Retained earnings, end of year This Year Last Year $3,957,500 $3,140,000 3,166,000 2,490,888 791,500 649,200 399,500 392,600 392,000 256,600 90,720 75,600 381,268 181,800 98,384 54,5 210,896 126,700 36,280 36,200 54,400 27,200 98,680 63,400 120,296 63,300 320,800 257,500 $ 441,096 $ 320,000 Pat Smith, who just three years ago was appointed president of Hill Company, admits that the company has been inconsistent in its performance over the past several years. But Smith argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 25% increase in sales over the past year. Smith also argues that investors have recognized the improving situation at Hill Company, as shown by the jump in the price of its common shares from $12 per share last year to $22 per share this year. Smith believes that with strong leadership and with the modernized equipment that the $2,021,000 loan will permit the company to buy, profits will be even stronger in the future. Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Hill Company's Industry: Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Tines interest earned ratio Price-earnings ratio Required: 2.38 1.20 31 days 60 days 9.58% 8.65 5.7 1. For both this year and last year, present the balance sheet in common-size format. (Round your answers to 1 decimal place.) Assels Cash Temporary investments Accounts rec Inventory Prepaid expenses HILL COMPANY Comparative Balance Sheet This Year Last Year Total current assets 0.0 0.0 Plant and equipment, net Total 0.0 % 0.0 % Liabilities and Shareholders' Equity Currentl % % Bonds payable, 10% Total lab 0.0 0.0 Shareholders' equity Preferred shares. 20,000, $2.40 no par value Common shares, 50,000 Retained earnings Total shareholders' equity 0 Total abilities and shareholders' equity 0.0 % 0.0 % 2. For both this year and last year, present the income statement in common-size format down through net income. (Round your answers to 1 decimal place.) HILL COMPANY Comparative Income Statement 2. For both this year and last year, present the income statement in common-size format down through net income. (Round your answers to 1 decimal place.) HILL COMPANY Comparative Income Statement This Year Last Year % Sales Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxas (30%) Net income