Made some errors on this. Thanks for the help!
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 $ 114,000 0 620,000 1,055,000 30,000 1,819,000 1,977,800 $ 3,796,800 $ 260,000 29,000 410,000 705,000 33,000 1,437,000 1,480,000 $ 2,917,000 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, 12% Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 855,000 800,000 1,655,000 $ 410,000 800,000 1,210,000 800,000 1,341,800 2,141,800 $ 3,796,800 800,000 907,000 1,707,000 $ 2,917,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,550,000 $ 4,680,000 Cost of goods sold 3,985,000 3,560,000 Gross margin 1,565,000 1,120,000 Selling and administrative expenses 675,000 570,000 Net operating income 890,000 550,000 Interest expense 96,000 96,000 Net income before taxes 794,000 454,000 Income taxes (30%) 238, 200 136,200 Net income 555, 800 317,800 Common dividends 121,000 100,000 Net income retained 434,800 217,800 Beginning retained earnings 907,000 689,200 Ending retained earnings $ 1,341,800 $ 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 sale 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. i. The times interest earned ratio. j. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,697,000.) Reg 1 Req 2A Reg 2B 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.) g. 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.) i. The times interest earned ratio. (Round your answers to 2 decimal places.) j. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,697,000.) (Round your answers to 2 decimal places.) Show less Last Year a. This Year 964,000 2.13 114,000.73 X b. 2,507,000 X 7.11 x 289,001.00 X c. d. Working capital Current ratio Acid-test ratio Average collection period Average sale period Operating cycle Total asset turnover 33.86 days 40.15 X days e. 4.53 x days 38.39 X days f. 4.05 X days 44.20 X days 1.39 X 0.71 1.65 g. h. 0.77 li. Debt-to-equity ratio Times interest earned ratio Equity multiplier 10.31 X 5.73 j. 1.74 1.74 x
