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Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,400. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate.

**Instructions**

**(a)**
Calculate the following ratios.

1. Current ratio 6. Gross profit rate

2. Accounts receivable turnover 7. Profit margin

3. Inventory turnover 8. Asset turnover

4. Debt to assets ratio 9. Return on assets

5. Times interest earned 10. Return on common stockholders' equity

**(b)**
Comment on your findings from part **(a)**.

**(c)**
Based on your analysis in parts **(a)** and
**(b)**, do you think a bank would lend Cookie &
Coffee Creations Inc. $20,000 to buy the additional equipment?
Explain your reasoning.

**(d)** What
alternatives could Cookie & Coffee Creations consider instead
of bank financing?

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​​​​​​" {a} 1. current Ratio "=(" current Assets ")/(" current liabilities ")=(59666)/(31486)=1.895Accounts Receivable Turnover Ratio =(" sales ")/(" sebtors ")=(462500)/(3250)=142.308Inventory Turnover =(COGS)/(" Inventory ")=(231250)/(17897)=12.921 4. Debt to Assets Ratio =(" Debt (LTB) ")/(10000)=0.04Debt to Assets Ratio =(" Debt (LTB) ")/(" Total Assets ")=(17897)/(149516)=0.04Times interest Earned =(EB1T)/(" Interest ")=(93050)/(550)=169.182Gross Profit Ratio =(" GP ")/(" sales ")xx100=(231250)/(462500)=50%Profit Margin =(NP)/(" sales ")xx100=(74000)/(462500)=16%Assets turnover =(" sales ")/(" Assets ")=(46 ... See the full answer