Crowley Building Supply sells various building materials to retail outlets. The

Question

Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:

     During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account.

Assume that the following ratios are typical of companies in the building supply industry:

Required:

a.

Average sale period. (The inventory at the beginning of last year totaled $514,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)

b.

Present the income statement in common-size form down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:

Explanation / Answer

This year Last year Sales 100.0% 100.0% Cost of goods sold 77.1% 78.7% Gross margin 22.9% 21.3% Selling and administrative expenses 13.0% 12.2% Net operating income 9.9% 9.1% Interest expense 1.0% 1.1% net income before taxes 9.0% 8.0% Income taxes 3.1% 2.8% Net income 5.8% 5.2%

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