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 $$560,000$ long$-$term loan from Gulfport State Bank, $$130,000$ of which will be used to bolster the Cash account and $$430,000$ of which will be used to modernize equipment. The company$$s financial statements for the two most recent years follow:

Sabin Electronics

Comparative Balance Sheet

This Year Last Year

Assets

Current assets:

Cash $ $94,000$ $ $210,000$

Marketable securities $024,000$

Accounts receivable, net $555,000360,000$

Inventory $1,005,000655,000$

Prepaid expenses $26,00028,000$

Total current assets $1,680,0001,277,000$

Plant and equipment, net $1,665,4001,430,000$

Total assets $ $3,345,400$ $ $2,707,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $830,000$ $ $490,000$

Bonds payable, $12\%900,000900,000$

Total liabilities $1,730,0001,390,000$

Stockholders' equity:

Common stock, $$15$ par $750,000750,000$

Retained earnings $865,400567,000$

Total stockholders$$ equity $1,615,4001,317,000$

Total liabilities and stockholders' equity $ $3,345,400$ $ $2,707,000$

Sabin Electronics

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $ $5,300,000$ $ $4,530,000$

Cost of goods sold $3,935,0003,510,000$

Gross margin $1,365,0001,020,000$

Selling and administrative expenses $665,000560,000$

Net operating income $700,000460,000$

Interest expense $108,000108,000$

Net income before taxes $592,000352,000$

Income taxes $(30\%)177,600105,600$

Net income $414,400246,400$

Common dividends $116,00095,000$

Net income retained $298,400151,400$

Beginning retained earnings $567,000415,600$

Ending retained earnings $ $865,400$ $ $567,000$

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 $2/10,$ 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 $$310,000.)$

e$.$ The average sale period. $($The inventory at the beginning of last year totaled $$560,000.)$

f$.$ The operating cycle.

g$.$ The total asset turnover. $($The total assets at the beginning of last year were $$2,600,000.)$

h$.$ The debt$-$to$-$equity ratio.

i$.$ The times interest earned ratio.

j$.$ The equity multiplier. $($The total stockholders$$ equity at the beginning of last year totaled $$1,307,000.)$

$2.$ For both this year and last year:

a$.$ Present the balance sheet in common$-$size format for both this year and last year.

b$.$ Present the income statement in common$-$size format down through net income for both this year and last year.