Baker & Co. has applied for a loan from the Trust Us Bank in order to invest in several potential opportunities. In order to evaluate the firm as a potential debtor, the bank would like to compare Baker & Co. to the industry. The following are the financial statements given to Trust Us Bank:

Balance Sheet				Income Statement
	2019	2018			2019	2018
Assets				Sales (100% credit)	1,330	1,100
Cash	270	305		Cost of goods sold	760	600
Accounts receivable	290	275		Gross profit	570	500
Inventory	580	600		Operating expenses	30	20
Current assets	1,140	1,180		Depreciation	200	160
Plant and equipment	1,940	1,700		Net operating income	340	320
Less: acc depr	-600	-500		Interest expense	57	64
Net plant and equipment	1,340	1,200		Net income before taxes	283	256
Total assets	2,480	2,380		Taxes	96	87
				Net income	187	169
Liab. and Owners' Equity
Accounts payable	200	150
Notes payable	0	125
Current liabilities	200	275
Bonds	500	500
Owners' Equity
Common stock	305	165
Paid-in-capital	775	775
Retained earnings	700	665
Total Owners' Equity	1,780	1,605
Total Liab. and Owners' Equity	2,480	2,380

Part 1 (8 marks). Compute the following ratios (to facilitate computation, first copy the information above and the ratio table below into Excel; second, complete the ratio table in Excel; third, paste it from Excel into the text box below).

	2019	2018	Industry
Current ratio			5.00
Acid test ratio			3.00
Inventory turnover			2.20
Avg collection period (days)			90
Debt ratio			0.33
Times interest earned			7.00
Total asset turnover			0.75
Fixed asset turnover			1.00
Operating profit margin			20.00%
Net profit margin			12.00%
Return on total assets			9.00%
Return on equity			10.43%

Part 2 (6 marks). In order to evaluate the firm, the bank would like to compare Baker & Co. to the industry. Discuss the strengths and weaknesses of Baker & Co. from this perspective (at least 3 strengths and 3 weaknesses, including an explanation for why you consider them strengths and weaknesses).

Part 3 (2 marks). Should the bank make the loan? Why or why not?