Harrod's Sporting Goods In January of 2016, Becky, who served as the company's chief financial officer, walked into Jim's office and said, "I've had it with the First National Bank of Omaha. It is willing to renew our loan and line of credit, but the bank wants to charge us 2% percentage points over prime." The prime rate is the rate at which banks make loans to their most creditworthy customers. It was 4.75 percent at the time Becky had visited the bank, so that the total rate on the loan would be 7.25 percent. It was not so much the total rate that Becky objected to, as the fact that Harrod's was being asked to pay 2% percent over prime. She felt that Harrod's was a strong enough company that one percent over prime should be all that the bank required. Her banker told her he would review the firm's financial statements with her next week and reconsider the premium Harrod's was being asked to pay over prime. 2 While Becky knew the bank "crunched all the numbers," she decided to do some additional financial analysis on her own. She had a bachelor's degree in finance with a 3.3 GPA. She began by examining Figures 1, 2, and 3 below. Figure 1 Harrod's Sporting Goods Income Statement (2013-2015) 2013 2014 2015 Sales 4,269,871 $4,483,360 $5,021,643 Cost of goods 2,991,821 2981434 3,242,120 $1,278,050 $1,501,926 $1,779,523 Gross Profit Selling and administrative expense 1004846 1175,100 $412,600 $497,080 $604,423 Operating profit