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 $630,000 long-term loan from Gulfport State Bank, $165,000 of which will be used to bolster the Cash account and $465,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

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 (for this year and last)

b.	The current ratio. (Round your answers to 2 decimal places. (for this year and last)

c.	The acid-test ratio. (Round your answers to 2 decimal places. (for this year and last)

d.	The average collection period. (The accounts receivable at the beginning of last year totaled $380,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.(for this year and last)

e.	The average sale period. (The inventory at the beginning of last year totaled $630,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.(for this year and last)

f.	The operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.(for this year and last)

g.	The total asset turnover. (The total assets at the beginning of last year were $2,900,000.) (Round your answers to 2 decimal places(for this year and last)

h.	The debt-to-equity ratio. (Round your answers to 3 decimal places.(for this year and last)

i.	The times interest earned ratio. (Round your answers to 1 decimal place.(for this year and last)

j.	The equity multiplier. (The total stockholders equity at the beginning of last year totaled $1,600,000.) (Round your answers to 2 decimal places.)(for this year and last)

2.	For both this year and last year:

a.	Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3)

b.	Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 119,000 640,000 1,075,000 30,000 280,000 10,000 430,000 725,000 35,000 1,864,000 1,933,600 1,480,000 1,460,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders Equity $3,797,600 2,940,000 Liabilities Current liabilities Bonds payable, 12% $ 810,000 $430,000 900,000 900,000 Total liabilities 1,710,000 1,330,000 Stockholders' equity Common stock, $15 par Retained earnings 660,000 1,427,600 660,000 950,000 1,610,000 $3,797,600 $2,940,000 Total stockholders' equity 2,087,600 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold $5,650,000 $4,740,000 3,580,000 4,005,000 Gross margin Selling and administrative expenses 1,645,000 679,000 1,160,000 574,000 Net operating income 966,000 108,000 586,000 108,000 Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 858,000 257,400 478,000 143,400 600,600 123,000 334,600 102,000 477,600 950,000 232,600 717,400 $1,427,600 $950,000