As an analyst for Royal Bank, it is your job to write recommendations to the bank's loan committee. Vernon Engineering Co., a client of the bank, has submitted these summary data to support the company's request for a $150,000 loan:

Required
Analyze these financial statement data to decide whether the bank should lend $150,000 to Vernon Engineering Co. Consider the trends in net income and owner's equity and the change in total liabilities in making your decision. Write a one-paragraph recommendation to the bank's loan committee.

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Income Statement Data Total revenues Total expenses Net income 2017 $550,000 400,000 $150,000 2016 $490,000 345,000 $145,000 2015 $475,000 305,000 $170,000 2016 $205,000 145,000 $350,000 (120,000) $230,000 Statement of Owner's Equity Data Beginning capital Add: Net income 2017 $230,000 150,000 $380,000 (175,000) $205,000 2015 $215,000 170,000 $385,000 (180,000) $205,000 2015 Less: Withdrawals Ending capit al Balance Sheet Data Total assets Total liabilities Total owner's equity Total liabilities and owner's 2017 S450,000 $245,000 205,000 S450,000 2016 $425,000 $195,000 230,000 $425,000 $375,000 $170,000 205,000 $375,000 equity