Paul Sabin organized Sabin Electronics 10 years ago in order 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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the cash account and $400,000 of which will be used to modernize certain key items of equipment. The company's financial statements for the two most recent years follow:

SABIN ELECTRWIG Comarative Balance Sheet This Year Last Year Assets Current assets: Cash 3} 62,606 5. 116,600 Marketable securities 14,400 Accounts receivable, net 4??,000 236,600 Inventory 95?,000 4?2,600 Prepaid expenses 19,206 1?,600 Total current assets 1,521,006 65?,400 Plant and equipment, net 1,166,006 1,092,600 Total assets $2J6311688 $ 1:959:39? Liabilities and Shareholders' Equity Liabilities: Current liabilities $ 296,000 $ 566,600 Bonds payable, 12% 466,000 406,600 Total liabilities 11195.1-933 955.1399 Shareholders' equity: Preferred shares, no par ($6; 26,566 shares issued) 25?,000 25?,600 Common shares, no par (unlimited authorized, 30,066 issued) 366,000 306,600 Retained earnings 923,000 42?,600 Total shareholders' equity 1,465,006 664,600 Total liabilities and shareholders' equity $2J6311969 $ 1:953:39\" ' SABIH ELEETFIIEIHIES Comparative Income Statement This Year Last Year Sales 3; 5,888,888 $ 4,858,888 Less: Cost of goods sold 3,835,888 3,288,888 Gross margin 1,185,888 858,888 Less: Operating expenses l858,888 585,888 Net operating income 515,888 345,888 Less: Interest expense 48,888 48,888 Net income before taxes 482,888 292,888 Less: Income taxes [38%) 148,188 89,188 Net income 328,988 282,988 Dividends paid: Preferred dividends 28,888 28,888 Common dividends 98,888 89,588 Total dividends paid 118,888 89,588 Net income retained 218,988 118,488 Retained earnings, beginning of year l823,888 585,288 Retained earnings, end of year $ 3434-533 $ 523,593 Current ratio 2.5 to 1 Acidtest {quick} ratio 1.3 to 1 Average age of receivables 18 days Inventory turnover in days 68 days Debttoequity ratio 6.96 to 1 Times interest earned E.B'times Return on total assets 13% Priceearnings ratio 12 ' This Year Last Year Working capital Current ratio to 1 to 1 Acid-test ratio to 1 to 1 Average age of receivables days days Inventory turnover in days days days Debt-to-equity ratio to 1 to 1 Times interest earned times timesSABIN ELECTRONICS Common-Size Balance Sheets This Year Last Year Current assets: Cash %% Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets 0.0 % 0.0 % Current liabilities % Bonds payable, 12% Total liabilities 0.0 0.0 Shareholders' equity: Preferred shares, no par, $6 Common shares, no par Retained earnings Total shareholders' equity 0.0 0.0 Total liabilities and equity 0.0 % 0.0 %SABIN ELECTRONICS Common-Size Balance Sheets This Year Last Year Sales % % Less cost of goods sold Gross margin Less operating expenses Net operating income Less interest expense Net income before taxes Less income taxes Net income % %