Morksen Corp. has enjoyed modest success in penetrating the personal electronic devices market since it began operations a few years ago. A new line of devices introduced recently has been well received by customers. However, the company president, who is knowledgeable about electronics but not accounting, is concerned about the future of the company.
Although the company has a line of credit with the local bank, it currently needs cash to continue operations. The bank wants more information before it extends the company€™s credit line. The president has asked you, as the company€™s chief accountant, to evaluate the company€™s performance by using appropriate financial statement analysis, and to recommend possible courses of action for the company. In particular, the president wants to know how the company can obtain additional cash. Summary financial statements for the past three years are available below.
Required:
1. Evaluate the company€™s performance and its financial condition for the past two years. Select six appropriate ratios to analyze the company€™s profitability, liquidity, and solvency for 2013 and 2014, and explain to the company€™s president the meaning of each ratio you calculate.
2. Based on your analysis of the ratios that you computed in (1), what recommendation would you make to the president for obtaining additional cash?

MORKSEN CORP.
Consolidated Statements of Financial Position
At December 31

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MORKSEN CORP Consolidated Statements of Earnings For the Years Ended December 31 in thousands of dollars Sales Cost of sales Gross profit Operating expenses before interest and income taxes Interest expense Earnings before income taxes Income tax expense Net earnings 2014 64.000 50,000 14,000 8,000 1.780 4,220 1.900 2,320 2013 $56,000 43.000 13.000 7400 1220 4.380 2.040 2.340 2012 $46,800 36,000 10,800 6,620 4,180 1.940 2,240 2013 in thousands of dollars) Assets Current assets 2014 2012 Cash Short-term investments Trade receivables Merchandise inventory $ 380 740 10,880 16,660 28.660 $ 480 740 8,400 10,060 19,680 1,000 740 5,140 7.220 14.100 Total current assets Property, piat, and equpment 4,000 26,000 30,000 8.940 21,060 $49,720 4,000 26,000 30,000 7440 22,560 $42,240 2,000 18,000 20,000 5,760 14.240 $28,340 Land Buildings and equipment Less accumulated depreciation Net property. plant, and equipment Total assets Liabilities and Shareholders' Equity Current fabiliies Bank loan Trade payables Other liabilities Income tax payable $16,500 6,000 1.640 960 25.100 $11,400 4,300 1,600 1.040 2,880 1.500 1.000 5,380 Total current liabilities Shareholders' equity Common shares Retained earnings Other comprehensive inoome 20,000 4,140 420 24,620 $49,720 20,000 3,520 380 23,900 $42.240 20,000 2,640 320 22.960 $28,340 Total shareholders' equity Total liabilities and shareholders' equity