You have just been hired as a loan officer at Fairfield State Bank. Your supervi

Question

You have just been hired as a loan officer at Fairfield State Bank. Your supervisor has given you a file containing a request from Hedrick Company, a manufacturer of auto components, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below Hedrick Company Comparative Balance Sheet This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 308,000 S 420,000 102,000 591,000 730,000 59,000 892,000 1,350,000 77,000 2,627,000 1,902,000 3,484,300 3,265,800 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity $ 6,111,300 $5,167,800 Liabilities Current liabilities Bonds payable, 10% $1,340,000 S 900,000 1,250,000 1,060,000 Total liabilities 2,590,000 1,960,000 Stockholders' equity: 600,000 Preferred stock, 896, $30 par value Common stock, $40 par value 600,000 2,000,000 2,000,000 921,300 607,800 3,521,300 3,207,800 Total liabilities and stockholders' equity $6,111,300 $5,167,800 Retained earnings Total stockholders' equity Hedrick Company Comparative Income Statement and Reconciliation This Year Last Year 5,320,000 4,250,000

Explanation / Answer

Comapritive balance sheet This yEear Last year Assets Amt $ % Amt % Cash 308000 5.0 420000 8.1 Marhetable Securities 0 0.0 102000 2.0 Accounts receivable,net 892000 14.6 591000 11.4 Inventory 1350000 22.1 730000 14.1 Prepaid Expenses 77000 1.3 59000 1.1 Total Current assets 2627000 43.0 1902000 36.8 Plant, equipment net 3484300 57.0 3265800 63.2 Total assets 6111300 100 5167800 100 Liabilities and stockholder Equity Liabilties Current Liabilties 1340000 21.9 900000 17.4 Bonds Payable,10% 1250000 20.5 1060000 20.5 Total liabilities 2590000 42.4 1960000 37.9 Stockholder equity Preferred Stock 600000 9.8 600000 11.6 Common Stock 2000000 32.7 2000000 38.7 Retained eranings 921300 15.1 607800 11.8 Total Stockholder equity 3521300 57.6 3207800 62.1 Total Liabilities and stockholders Equity 6111300 100 5167800 100 The base is total assets and total liabilities and stockholder equity as 100 and all the line items are divided by it Suppose for cash=308000/6111300*100 5% Comparitive Income Statement This Year Last year Sales 5320000 100 4250000 100 Cost of Good Sold 4040000 75.9 3140000 73.9 Gross margin 1280000 24.1 1110000 26.1 Selling and administrative Expenses 510000 9.6 520000 12.2 Net opearting income 770000 14.5 590000 13.9 Interest expense 125000 2.3 106000 2.5 Net Income before taxes 645000 12.1 484000 11.4 Taxes 193500 3.6 145200 3.4 Net Income 451500 8.5 338800 8.0 the base is taken as sales at 100% and all the line items are divided by it For ex COGS=4040000/5320000*100 75.90% like this for all other line items for this year

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