what appear to be the problem areas in HH? Do the finanical ratios suggest questions that Ms. Platt and Mr. Green need to address?

MINICASE Burchetts Green had enjoyed the bank training course, but it was good to be starting his first real job in the corporate lending group. Earlier that morning the boss had handed him a set of financial statements for The Hobby Horse Company Inc. (HH). "Hobby Horse," she said, "has a $45 million loan from us due at the end of September, and it is likely to ask us to roll it over. The company seems to have run into some rough weather recently, and I have asked Furze Platt to go down there this afternoon and see what is happening. It might do you good to go along with her. Before you go, take a look at these financial statements and see what you think the problems are. Here's a chance for you to use some of that stuff they taught you in the training course." Mr. Green was familiar with the HH story. Founded in 1990, it had rapidly built up a chain of discount stores selling materials for crafts and hobbies. However, last year a number of new store openings coinciding with a poor Christmas season had pushed the company into loss. Management had halted all new construction and put 15 of its existing stores up for sale Mr. Green decided to start with the 6-year summary of HH's balance sheet and income statement Table 4.10). Then he turned to examine in more detail the latest position (Tables 4.11 and 4.12). Table 4.10 Financial highlights for The Hobby Horse Company Inc.year ending March 31 2018 2017 2016 2015 Net sales 3.351 2.796 2,493 2,160 2019 2014 3,314 2,845 EBIT -9 312 256 243 156 212 48 Interest 37 63 65 58 46 Taxes 3 60 46 43 39 34 -49 189 145 142 125 76 Net profit Earnings per share Current assets -0.15 0.55 0.44 0.42 0.37 0.25 669 469 491 435 392 423 Net fixed assets 923 780 753 680 610 536 Total assets 1.592 1.249 1.244 1.115 1.002 959 Current liabilities 680 365 348 302 276 320 236 159 297 311 315 319 676 725 599 502 324 407 Long-term debt Stockholders' equity Number of stores Employees 221 211 240 184 170 157 13,057 11.835 9,810 9,790 9,075 7,825 Page 117 1.990 Table 411 Income statement for The Hobby Horse Company Inc., year ending March 31, 2019 (figures in $ millions) Net sales $3,351 Cost of goods sold Selling, general, and administrative expenses 1.211 Depreciation expense 159 Earnings before interest and taxes (EBIT) Net interest expense 37 Taxable income $ Income taxes Net income -S 49 Allocation of net income Addition to retained earings Dividends $ 46 3 49 0 Mar. 31, 2018 $ 72 194 203 $ 469 S 910 130 Table 4.12 Consolidated balance sheet for The Hobby Horse Company Inc. (figures in $ millions) Assets Mar. 31, 2019 Current assets Cash and marketable securities S 14 Receivables 176 Inventories 479 Total current assets $ 669 Fixed assets Property, plant and equipment $1,077 Less accumulated depreciation 154 Net fixed assets $ 923 Total assets $1,592 Liabilities and Shareholders' Equity Mar. 31, 2019 Current liabilities Debt due for repayment $ 484 Accounts payable 94 Other current liabilities 102 Total current liabilities $ 680 Long-term debit $ 236 Stockholders' equity Common stock and other paid in capital $ 155 $ 780 $1.249 Mar. 31, 2018 $ 222 S8 85 S 365 S 159 $ 155 Common stock and other paid-in capital $ 155 $ 1SS Retained earnings 521 570 Total stockholders' equity $ 676 $ 725 Total liabilities and stockholders' equity $1,592 $1.249 Note Columsums subject to rounding error What appear to be the problem areas in HH? Do the financial ratios suggest questions that Ms. Platt and Mr. Green need to address