The chief executive officer of Romney Heights has included the following information from the financial statements in a loan application submitted to Acme Bank. The company intends to acquire additional equipment and wishes to finance the purchase with a long-term note.

REQUIRED:
Assume that you, a bank loan officer, review the financial statements and recommend whether Romney Heights should be considered for a loan. Support your recommendation with calculations.

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2017 2016 Balance Sheet $14,000 $12,000 Current assets Long-term assets 50,000 43,000 Current liabilities 7,000 6,000 Long-term liabilities 26,000 21,000 Common stock 25,000 25,000 Retained earnings 6,000 3,000 Income Statement $35,000 $32,000 Revenues Expenses 23,000 26,000 Statement of Cash Flows $ 9,000 Net cash flow from operating activities $15,000 (12,000) Net cash flow from investing activities (14,000) Net cash flow from financing activities 7,000 5,000 $ 8,000 $ 2,000 Change in cash balance Beginning cash balance 3,000 1,000 $ 3,000 $11,000 Ending cash balance