John Dawson Jr., president of Dawson Stores, Inc., had a discussion with Stefanie Anderson, a loan officer at Springfield National Bank. Both Mr. Dawson and Dawson Stores, Inc., were deposit customers of the bank and had been for several years.
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Questions
1. Appraise the recent performance and financial position of Dawson Stores, Inc., using selected financial ratios as appropriate.
2. As Stefanie Anderson, would you conclude that the company is a good credit risk?

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DAWSON STORES, INC. Comparative Balance Sheets As of January 31 (amounts in thousands) 2007 2008 2009 2010 Assets Current assets: Cash Accounts receivable (net) inventories Supplies and prepaid expenses s 107 2,862 2,600 70 S 141 3,007 2,383 100 5,631 318 5,186 s 709 3,378 2,821 91 6,999 162 S 916 3,767 3,090 75 7,848 201 Total current assets Investments and other assets Property, plant, and equipment (net) Total assets 5,639 287 4,917 10,843 53855,707 $11.135 12546$13.756 512,546 Liabilities and Shareholders Equity Current Wablities Accounts payable Taxes other than income taxes Accrued labilities Income taxes, currently payable Deferred income taxes, instalilment sales Current portion of long-term debt 1,1531,166 1,767 S 2,272 418 792 480 589 141 4,692 2,942 302 379 410 221 374 119 2,656 3,494 266 389 454 229 401 143 2,782 3,430 292 414 676 491 181 4,013 3,136 Total current fiabilities Long-term debt Delerred credits Shareholders' equity Capital stock Retained earnings 130 .297 $10,843 130 4,501 $11,135 130 5,023 512,546 130 5,690 $13,756 Total liabilities and shareholders equity DAWSON STORES, INC. Comparative Statements of Income and Retained Earnings For the Years Ending January 31 (amounts in thousands) 2007 2008 2009 2010 $18,297 $19,558 $21,976 $24,128 16,527 7,601 5,830 1,771 Revenues Cost of sales 12,816 5,481 4,789 692 13,884 5,674 5,023 651 15,163 6,813 5,422 1,391 Operating expenses Earnings before income taxes Income taxes: 246 91 337 355 4,058 116 S 4,297 275 48 323 328 4,297 124 4.501 690 34 724 667 4,501 145 5,023 813 104 917 854 5,023 187 s 5,690 Current Deferred Net income Retained earnings, beginning of the year Less: Dividends Retained earnings, end of year Earnings per share (100,000 shares issued and outstanding) S 3.55 3.286.68.54 DAWSON STORES, INC. Statements of Cash Flows For the Years Ending January 31 (amounts in thousands) 2009 2010 Cosh flows from operoting activities Net income Adjustments for differences between net income S 667 and cash flows from operating activities Depreciation and amortization expense Equity in loss of joint venture Increases) Decreases in current assets Accounts receivable (net) Inventories Supplies and prepaid expenses Increases (decreases) in current iabilities: Accounts payable Accrued liabilities and others Income taxes currently payable Deferred income taxes Cash provided by operations 830 1.4851,393 Cash tlow for investing activities Additions to property, plant, and equipment Receipts from disposals of property and equipment Mortgages assumed by purchasers of office properties (933) and prepayment on long-term debt Investments Other (net) Cash used for investing activities (655) (632)(516)765) Cash low for financing activities Proceeds from long-term debt Reductions of long-term debt Cash dividends (353) 16)124 45) 187 Cash used for financing activities Increase (decrease) in cash Cash at beginning of the year Cash at end of the year 7 s 709