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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

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 $660,000 long-term loan from Gulfport State Bank, $180,000 of which will be used to bolster the Cash account and $480,000 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 $ 128,000 $ 310,000
Marketable securities 0 13,000
Accounts receivable, net 685,000 460,000
Inventory 1,105,000 755,000
Prepaid expenses 34,000 38,000
Total current assets 1,952,000 1,576,000
Plant and equipment, net 2,061,000 1,450,000
Total assets $ 4,013,000 $ 3,026,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities $ 880,000 $ 460,000
Bonds payable, 12% 750,000 750,000
Total liabilities 1,630,000 1,210,000
Stockholders' equity:
Common stock, $15 par 750,000 750,000
Retained earnings 1,633,000 1,066,000
Total stockholders equity 2,383,000 1,816,000
Total liabilities and equity $ 4,013,000 $ 3,026,000

Sabin Electronics
Comparative Income Statement and Reconciliation
This Year Last Year
Sales $ 5,800,000 $ 4,830,000
Cost of goods sold 4,035,000 3,610,000
Gross margin 1,765,000 1,220,000
Selling and administrative expenses 685,000 580,000
Net operating income 1,080,000 640,000
Interest expense 90,000 90,000
Net income before taxes 990,000 550,000
Income taxes (30%) 297,000 165,000
Net income 693,000 385,000
Common dividends 126,000 105,000
Net income retained 567,000 280,000
Beginning retained earnings 1,066,000 786,000
Ending retained earnings $ 1,633,000 $ 1,066,000

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.

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a. The amount of working capital. This Year Last Year Working capital b. The current ratio. (Round your answers to 2 decimal places.) This Year Last Year Current ratio c. The acid-test ratio. (Round your answers to 2 decimal places.) his Year Last Year Acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $410,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.) This Year Last Year Average collection period days days

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