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Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents. Although the company has been fairly profitable, it is now experiencing a severe cash shortage. For this reason, it is requesting a $610,000 long-term loan from Gulfport State Bank, $155,000 of which will be used to bolster the Cash account and $455,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow, Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash 114,000 $ 260,000 Marketable securities 29,000 Accounts receivable, net 620,000 410,000 Inventory 1,055,000 705,000 Prepaid expenses 30,000 33,000 Total current assets 1,819,000 1,437,000 Plant and equipment, net 1,977,800 1,480,000 Total assets 5 3,796,800 $ 2,917,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 855,000 $ 418,000 Bonds payable, 12% 800,000 800.000 Total liabilities 1,655,000 1,210,000 Stockholders equity Common stock, $15 par 800,000 800,000 Retained earnings 1,341,800 9e7,800 Total stockholders' equity 2,141,800 1,707,000 Total liabilities and stockholders' equity $ 3,796,800 $ 2,917,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Sales $ 5,550,000 Cost of goods sold 3,985,000 Gross margin 1,565,000 Selling and administrative expenses 675,000 Net operating income 890,000 Interest expense 96,000 Net income before taxes 794,000 Income taxes (30%) 238, 200 Net income 555,888 Common dividends 121,800 Net income retained 434,800 Beginning retained earnings 987,000 Ending retained earnings $ 1,341,800 Last Year $ 4,680,000 3,560,000 1,120,000 570,000 550,000 96,000 454,000 136,200 317,800 100,000 217,800 689,200 $ 907,000 During the past year, the company introduced several new product lines and raised the selling prices on a number of old product lines in order to improve its profit margin. The company also hired a new sales manager, who has expanded sales into several new territories. Sales terms are 3/10.n/30. All sales are on account Required: 1. To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year. a. The amount of working capital b. The current ratio. c. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $360,000.) e. The average sole period (The inventory at the beginning of last year totaled $610,000.) f. The operating cycle g. The total asset turnover. (The total assets at the beginning of last year were $2.890.000) h. The debt-to-equity ratio. 1. The times interest earned ratio. J. The equity multiplier (The total stockholders' equity at the beginning of last year totaled $1,697,000) 2. For both this year and last year: a. Present the balance sheet in common-size format. b. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year: a. The amount of working capital. b. The current ratio. (Round your answers to 2 decimal places.) C. The acid-test ratio. (Round your answers to 2 decimal places.) d. The average collection period. (The accounts receivable at the beginning of last year totaled $360,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) e. The average sale period. (The inventory at the beginning of last year totaled $610,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) 9. The total asset turnover. (The total assets at the beginning of last year were $2,890,000.) (Round your answers to 2 decimal places.) h. The debt-to-equity ratio. (Round your answers to 2 decimal places.) 1. The times interest earned ratio. (Round your answers to 2 decimal places.) 1. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,697,000.) (Round your answers to 2 decimal places.) This Year Last Year a. Working capital b. Current ratio c. Acid-test ratio d. Average collection period e. Average sale period 1. Operating cycle g. Total asset turnover h. Debt-to-equity ratio i. Times interest earned ratio j. Equity multiplier days days days days days days Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash % % 0.0 0.0 0.0 % 0.0 % Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 12% Total liabilities Stockholders' equity: Common stock, S15 par Retained earnings Total stockholders' equity Total liabilities and equity % % 0.0 0.0 0.0 0.0 0.0 % 0.0% Present the income statement in common-size format down through net income. ( Sabin Electronics Last Year % % 0.0 Common-Size Income Statements This Year Sales % Cost of goods sold Gross margin 0.0 Selling and administrative expenses Net operating income 0.0 Interest expense Net income before taxes 0.0 Income taxes Net income 00% 0.0 0.0 0.01%

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