HW16 Q11

Saved 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 $670.000 long-term loan from Gulfport State Bank, $185,000 of which will be used to bolster the Cash account and $485,000 of which will be used to modernize equipment The company's financial statements for the two most recent years follow: This Year Last Year Sabin Electronics Comparative Balance Sheet Assets Current assets Cash 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, 125 Total liabilities Stockholders' equity! Common stock. 515 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 133,000 0 698,000 1,115,000 34,000 1,980,000 2.015,600 $ 3,995,600 $ 320,000 14,000 470,000 765,000 39,000 1,608,000 1.380,000 $ 2,988,000 s 885,000 750,000 1,635,000 $ 470,000 750,000 1,220,000 860,000 1,500,600 2.360.600 $ 3,995,600 860,000 908,000 1,768,000 $ 2,988,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,850,000 $ 4,860,000 Cost of goods sold 4,045.000 3,620,000 Gross margin 1,805,000 1,240,000 Selling and administrative expenses 687,000 582,000 Net operating income 1,118,000 658,000 Interest expense 90,000 90,000 Net income before taxes 1,028,000 568,000 Income taxes (3 308, 400 170,400 Net income 719,600 397,600 Common dividends 127,000 106,000 Net income retained 592,600 291,600 Beginning retained earnings 908,000 616,400 Ending retained earnings $ 1,500, 600 $ 908,000 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 2/10, 1/30. 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 current ratio b. The acid-test ratio c. The average collection period (The accounts receivable at the beginning of last year totaled $420,000) a. The average sale period (The inventory at the beginning of last year totaled $670,000) e. The debt-to-equity ratio. 2. For both this year and last year: Present the income statement in common size format down through net income for both this year and test year, Complete this question by entering your answers in the tabs below. Reg1 Reg 2 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 current ratio. (Round your answers to 2 decimal places.) b. The acid-test ratio. (Round your answers to 2 decimal places) The average collection period. The accounts receivable at the beginning of last year totaled $420,000.) (Round your Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 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 current ratio. (Round your answers to 2 decimal places.) b. The acid-test ratio. (Round your answers to 2 decimal places.) C. The average collection period. (The accounts receivable at the beginning of last year totaled $420,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) d. The average sale period. (The inventory at the beginning of last year totaled $670,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) e. The debt-to-equity ratio. (Round your answers to 2 decimal places.) Show less This Year Last Year a. Current ratio b. Acid-test ratio c. Average collection period d. Average sale period e. Debt-to-equity ratio days days days days Rog: Req 2 > Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Present the income statement in common-size format down through net income for both this ye answers to 1 decimal place.) Last Year % Sabin Electronics Common-Size Income Statements This Year Sales % Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes Net income % %