$($Financial statement analysis$)$ The T$.$ P$.$ Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $$600,000$ for the year just ended, and its total assets

exceeded $$500,000.$ The company was started by Mr$.$ Jarmon just $10$ years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has

decided to seek a line of credit from the firm's bank totaling $$86,000.$ In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months

tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr$.$ Vehlim wants to use the line of credit to supplant a large portion of

the firm's payables during the summer, which is the firm's peak seasonal sales period.

The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided. These statements

are found in the following tables: $.$ Jan Fama, associate credit analyst for the Merchants National Bank of Midland, Michigan, was assigned the task of analyzing Jarmon's loan request.

a$.$ Calculate the following financial ratios for $2013$: $.$

b$.$ Which of the ratios calculated in part $($a$)$ do you think should be most crucial in determining whether the bank should extend the line of credit?

c$.$ Use the information provided by the financial ratios and industry$-$norm ratios to decide if you would support making the loan. Discuss the basis for your recommendation.

Data table

Data table T$.$ P$.$ Jarmon Company Balance Sheets

$2012$

$2013$

Cash

$ $15$ comma $100$$$15,100$

$ $14$ comma $100$$$14,100$

Marketable securities

$6$ comma $0006,000$

$6$ comma $1906,190$

Accounts receivable

$41$ comma $90041,900$

$32$ comma $90032,900$

Inventory

$51$ comma $10051,100$

$83$ comma $90083,900$

Prepaid rent

$1$ comma $2101,210$

$1$ comma $1101,110$

Total current assets

$ $115$ comma $310$$$115,310$

$ $138$ comma $200$$$138,200$

Net plant and equipment

$286$ comma $000286,000$

$270$ comma $100270,100$

Total assets

$ $401$ comma $310$$$401,310$

$ $408$ comma $300$$$408,300$

$2012$

$2013$

Accounts payable

$ $48$ comma $100$$$48,100$

$ $57$ comma $000$$$57,000$

Notes payable

$15$ comma $00015,000$

$13$ comma $10013,100$

Accruals

$6$ comma $0006,000$

$5$ comma $0005,000$

Total current liabilities

$ $69$ comma $100$$$69,100$

$ $75$ comma $100$$$75,100$

$$Long$-$term debt

$160$ comma $100160,100$

$150$ comma $100150,100$

Common$$ stockholders' equity

$172$ comma $110172,110$

$183$ comma $100183,100$

Total liabilities and$$ owners' equity

$ $401$ comma $310$$$401,310$

$ $408$ comma $300$$$408,300$

$($Click on the icon in order to copy its contents into a spreadsheet.$)$

T$.$ P$.$ Jarmon Company

Income Statement for $2013$

Sales$($all credit$)$

$ $600$ comma $000$$$600,000$

$$Less: Cost of goods sold

$(460$ comma $100)(460,100)$

Gross profit

$ $139$ comma $900$$$139,900$

$$Less: Operating and interest expenses

General and administrative

$$(30$ comma $100)$$$(30,100)$

Interest

$(10$ comma $100)(10,100)$

Depreciation

$(29$ comma $900)(29,900)$

Total

$$(70$ comma $100)$$$(70,100)$

Earnings before taxes

$ $69$ comma $800$$$69,800$

$$Less: Taxes

$(27$ comma $000)(27,000)$

Net income available to common stockholders

$ $42$ comma $800$$$42,800$

$$Less: Cash dividends

$(31$ comma $800)(31,800)$

Change in retained earnings

$ $11$ comma $000$$$11,000$