The 2013 financial statements for Thor and Gunnar Companies are summarized here:

These two companies are in the same business and state but different cities. One-half of Thor’s sales and one-quarter of Gunnar’s sales are on credit. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Thor Company wants to borrow $105,000, and Gunnar Company is asking for $36,000.

The loans will be for a two-year period. Neither company issued stock in 2013. Assume the end-of-year total assets and net property and equipment balances approximate the year’s average.

Required:

1. Calculate the ratios in Exhibit 13.5 for which sufficient information is available. Round all calculations to two decimal places.

2. Assume that you work in the loan department of a local bank. You have been asked to analyze the situation and recommend which loan is preferable. Based on the data given, your analysis prepared in requirement 1, and any other information, give your choice and the sup-porting explanation.

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Thor Company Gunnar Company Balance Sheet Cash $ 35,000 77,000 154,000 770,000 196,000 $ 54,000 Accounts Receivable, Net Inventory Property and Equipment, Net Other Assets 6,000 30,000 192,000 68,400 Total Assets $1,232,000 $350,400 $ 168,000 266,000 672,000 70,000 56,000 $1,232,000 $ 18,000 66,000 252,000 4,800 9,600 $350,400 Current Liabilities Long-term Debt (12% interest rate) Capital Stock (par $20) Additional Paid-in Capital Retained Earnings Total Liabilities and Stockholders' Equity Income Statement $336,000 (180,000) (114,000) $ 42,000 Sales Revenue $1,120,000 (672,000) (336,000) $ 112,000 Cost of Goods Sold Other Expenses Net Income Selected Data from 2012 Statements Accounts Receivable, Net Inventory Property and Equipment, Net Long-term Debt (12% interest rate) Total Stockholders' Equity $ 65,800 133,000 770,000 266,000 798,000 $ 13,200 45,600 192,000 66,000 266,400 Other Data Per share price at end of 2013 13.20 $ 19.60