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 $640,000 long-term loan from Gulfport State Bank, $170,000 of which will be used to bolster the Cash account and $470,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 126,000 $ 290,000 Marketable securities 0 11,000 Accounts receivable, net 659,000 440,000 Inventory 1,020,000 735,000 Prepaid expenses 34,000 36,000 Total current assets 1,839,000 1,512,000 Plant and equipment, net 2,084,600 1,470,000 Total assets $ 3,923,600 $ 2,982,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 870,000 $ 440,000 Bonds payable, 12% 800,000 800,000 Total liabilities 1,670,000 1,240,000 Stockholders' equity: Common stock, $20 par 830,000 830,000 Retained earnings 1,423,600 912,000 Total stockholders equity 2,253,600 1,742,000 Total liabilities and equity $ 3,923,600 $ 2,982,000

Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,700,000 $ 4,770,000 Cost of goods sold 4,015,000 3,590,000 Gross margin 1,685,000 1,180,000 Selling and administrative expenses 681,000 576,000 Net operating income 1,004,000 604,000 Interest expense 96,000 96,000 Net income before taxes 908,000 508,000 Income taxes (30%) 272,400 152,400 Net income 635,600 355,600 Common dividends 124,000 103,000 Net income retained 511,600 252,600 Beginning retained earnings 912,000 659,400 Ending retained earnings $ 1,423,600 $ 912,000

1. Find earnings per share for both years. No change in common stock over last year (round to 2 decimal places)

2. Find the dividend yield ratio for both years. Company stock is currently selling for $60 per share; last year it was $55 per share. 3. Find the dividend payout ratio for both years.

4. Find the price-earnings ratio for both years.

5. Book value per share of common stock for both years

6. Find the gross margin percentage for both years

7. Find the net profit margin percentage for both years.

8. Find the return on total assets for both years (total assets at the beginning of last year were $2,942,000)

9. Find the return on equity for both years (Stockholders' equity at the beginning of last year was $1,732,000)

Is the company's financial leverage positive or negative?