Use the Data for Case Study $1$Links to an external site.Open this document with ReadSpeaker docReader file, which includes $3$ years of income statements and $3$ years of balance sheet information.

Scenario: You are a banker. The CFO of The Best Used Book Store is asking for a $$100,000$ loan. He explains that the company has successfully grown its inventory and has a current year return on equity of $15\mathrm{.}1\%.$ Sales grew $6\%$ last year, and they are in need of additional working capital. Calculate the following financial ratios for the prior $3$ years. $($Go to Files for data.$)$

Net profit margin

Gross profit margin

Operating expense as a percent of sales

Return on assets

Current ratio

Quick ratio

Return on equity

Debt to equity

Debt to assets

Based on your analysis of the $3$ years of information, describe the condition of the company. Is it healthy? Why or why not?

What are your concerns about the company? Would you approve the loan? Why or why not?

Please make sure you submit this assignment. It should be submitted as a single Word document. Along with a narrative, you should include tables with the ratios shown.

The Best Used Book Store The Best Used Book Store

Income Statement $202220232024$ Balance Sheet $202220232024$

Sales $$800,000$ $$850,000$ $$900,000$ Assets

COGS $$380,00047\mathrm{.}5\%$ $$420,00049\mathrm{.}4\%$ $$460,00051\mathrm{.}1\%$ Current Assets

Gross Profit $$420,00052\mathrm{.}5\%$ $$430,00050\mathrm{.}6\%$ $$440,00048\mathrm{.}9\%$ Cash $48,35516,50011,055$

Accounts Receivable $40,00080,000240,000$

Operating Expense Inventory $400,000500,000550,000$

Payroll $$150,00018\mathrm{.}8\%$ $$170,00020\mathrm{.}0\%$ $$200,00022\mathrm{.}2\%$ Total Current Assets $488,355596,500801,055$

Benefits $$18,0002\mathrm{.}3\%$ $$20,4002\mathrm{.}4\%$ $$24,0002\mathrm{.}7\%$

Rent $$12,0001\mathrm{.}5\%$ $$12,5001\mathrm{.}5\%$ $$13,0001\mathrm{.}4\%$ Fixed Assets

Utilities $$24,0003\mathrm{.}0\%$ $$28,0003\mathrm{.}3\%$ $$36,0004\mathrm{.}0\%$ Vehicles $30,00030,00030,000$

Telephone $$3,0000\mathrm{.}4\%$ $$3,1000\mathrm{.}4\%$ $$3,0000\mathrm{.}3\%$ Less Depreciation $(7,500)(15,000)(22,500)$

Insurance $$1,8000\mathrm{.}2\%$ $$1,8000\mathrm{.}2\%$ $$2,1000\mathrm{.}2\%$ Equipment $300,000300,000300,000$

Supplies $$5,6000\mathrm{.}7\%$ $$6,0000\mathrm{.}7\%$ $$6,3000\mathrm{.}7\%$ Less Depreciation $(30,000)(60,000)(90,000)$

Advertising $$25,0003\mathrm{.}1\%$ $$35,0004\mathrm{.}1\%$ $$35,0003\mathrm{.}9\%$ Total Fixed Assets $292,500255,000217,500$

Depreciation $$37,5004\mathrm{.}7\%$ $$37,5004\mathrm{.}4\%$ $$37,5004\mathrm{.}2\%$

Interest Expense $$26,4003\mathrm{.}3\%$ $$22,4002\mathrm{.}6\%$ $$18,4002\mathrm{.}0\%$ Total Assets $780,855851,5001,018,555$

Total Expenses $$303,30037\mathrm{.}9\%$ $$336,70039\mathrm{.}6\%$ $$375,30041\mathrm{.}7\%$

Liabilities and Owners Equity

Pre$-$tax Profit $$116,70014\mathrm{.}6\%$ $$93,30011\mathrm{.}0\%$ $$64,7007\mathrm{.}2\%$ Current Liabilities

Taxes $$(40,845)-5\mathrm{.}1\%$ $$(32,655)-3\mathrm{.}8\%$ $$(22,645)-2\mathrm{.}5\%$ Accounts Payable $300,000350,000500,000$

Net Profit $$75,8559\mathrm{.}5\%$ $$60,6457\mathrm{.}1\%$ $$42,0554\mathrm{.}7\%$ Taxes Payable $25,00035,00060,000$

Total Current Liabilities $325,000385,000560,000$

Long$-$term Debt $280,000230,000180,000$

Total Liabilities $605,000615,000740,000$

Owners Equity

Paid$-$in Capital $100,000100,000100,000$

Retained Earnings $75,855136,500178,555$

Total Equity $175,855236,500278,555$

Total Liabilities & Owners Equity $780,855851,5001,018,555$