You have just been hired as a loan officer at Fairfield State Bank. Your supervisor has given you a file containing a request from Hedrick Company, a manufacturer of auto components, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below:

Marva Rossen, who just two years ago was appointed president of Hedrick Company, admits that the company has been inconsistent in its performance over the past several years. But Rossen argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 26% increase in sales over the last year. Rossen also argues that investors have recognized the improving situation at Hedrick Company, as shown by the jump in the price of its common stock from $64 per share last year to $48 per share this year. Rossen believes that with strong leadership and with the modernized equipment that the $1,000,000 loan will enable 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 Hedricks industry:

Current ratio	2.3
Acid-test ratio	1.2
Average collection period	31	days
Average sale period	60	days
Return on assets	9.5	%
Debt-to-equity ratio	0.65
Times interest earned ratio	5.7
Price-earnings ratio	10

Hedrick Company Comparative Balance Sheet This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 338,000 $ 414,000 103,000 605,000 750,000 60,000 898,000 1,340,000 75,000 Total current assets Plant and equipment, net 2,651,000 3,475,500 1,932,000 3,205,200 Total assets $ 6,126,500 $5,137,200 Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 10% $1,320,000 1,210,000 890,000 1,040,000 Total liabilities 2,530,000 1,930,000 Stockholders' equity Preferred stock, 896, $30 par value Common stock, $40 par value Retained earnings 600,000 2,000,000 996,500 600,000 2,000,000 607,200 Total stockholders' equity 3,596,500 3,207,200 Total liabilities and stockholders' equity $ 6,126,500 $5,137,200