Manufacturers Bank is evaluating Aluminum Industries, Inc., which has requested a $3 million loan. On the basis of the debt ratios for Aluminum, along with the industry averages and Aluminum’s recent financial statements (which follow), evaluate and recommend appropriate action on the loan request.

Industry Averages
Debt ratio ..........0.51
Debt-equity ratio .......1.07
Times interest earned ratio ....7.30

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Aluminum Industries, Inc. Income Statement For the Year Ended December 31, 2012 Sales revenue Less: Cost of goods sold Gross profit Less operating expenses $30,000,000 21,000,000 $ 9,000,000 Selling expense General and administrative expenses Lease expense Depreciation expense $3,000,000 1,800,000 200,000 1.000.000 Total operating expenses Operating profit Less: Interest expense Net profit before taxes Less: Taxes (rate-: 40%) Net profits after taxes $ 6,000,000 3,000,000 1,000,000 $ 2,000,000 800,000 Aluminum Industries, Inc Balance Sheet December 31, 2012 Assets Liabilities and Stockholders' Equitv Current assets Current liabilities Cash Marketable securiie 3,000,000 Notes payable Accounts receivable 12,000,000 Accruals Inventories S1,000,000 Accounts payable S8,000,000 8,000,000 500,000 $16,500,000 $20,000,000 7.500.000 Total current liabilities Total current assets $23,500,000 Long-term debt (incl. financia leases) Total Liabilities 36,500,000 Machinery and equip 20,500,000 Preferred stock (25,000 shrs, S4 S 2,500,000 Furmiture and fixtures 8,000.000 Common stock (1 million shr, 5,000,000 Fixed assets (at cost) Land and buildings $11,000,000 Stockholders equity ment $5 par) Gross fixed assets Less: Accumulated de- 13.000.000 $39,500,000 Paid-in capital in excess of pa 4,000,000 2.000,000 Retained eanings preciation Net fixed assets $26,500,000 Total stockholders equity $13,500,000 Total liabilities and stockholders Total assets S50,000,0 equity