The chief executive officer of Ginny's Fashions has included the following financial statements in a loan application submitted to Priority Bank. The company intends to acquire additional equipment and wishes to finance the purchase with a long-term note.

Assume that you, a bank loan officer, review the financial statements, and recommend whether Ginny's Fashions should be considered for a loan. Support your recommendation with financial ratios. Assume a tax rate of 30 percent. Interest expense is $2,000 in 2012 and $2,000 in2011.

Transcribed Image Text:

2012 2011 Balance Sheet S 21,000 S 14.000 Current assets. Long-term assets Current liabilities Long-term liabilities Contributed capital Retained earnings 52.000 9.000 24,000 25.000 50.000 7.000 26,000 25.000 15.000 6.000 Income Statement S 74.000 S 70,000 53,000 Revenues Expenses 56.000 Statement of Cash Flows S 9,000 (12,000) 5,000 S 15.000 (14,000) 7.000 Net cash from operating activities Net cash from investing activities Net cash from financing activities Change in cash balance Beginning cash balance Ending cash balance S 2.000 9.000 S11.000 S 8,000 1.000 S 9,000