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. 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 $$310,000.)($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 $$560,000.)($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 $$2,600,000.)($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$$ equity at the beginning of last year totaled $$1,307,000.)($Round your answers to $2$ decimal places.$)$