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 $600,000 long-term loan from Gulfport State Bank, $150,000 of which will be used to bolster the Cash account and $450,000 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 S 110,000 0 607,000 1,045,000 30,000 1,792,000 1,946,400 $ 3,738, 400 S 250,000 28,000 400,000 695,000 32,000 1,405,000 1,470,000 $ 2,875,000 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 123 Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equ Total liabilities and stockholders' equity $ 850,000 750,000 1,600,000 S 400,000 750,000 1,150,000 790,000 1,348, 400 2,138, 400 $ 3,738, 400 790,000 935,000 1,725,000 $ 2,875,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,500,000 $ 4,650,000 Cost of goods sold 3,975,000 3,550,000 Gross margin 1,525,000 1,100,000 Selling and administrative expenses 673,000 568,000 Net operating income 852,000 532,000 Interest expense 90,000 90,000 Net income before taxes 762,000 442,000 Income taxes (30%) 228, 600 132, 600 Net income 533, 400 309, 400 Common dividends 120,000 99,000 Net income retained 413, 400 210,400 Beginning retained earnings 935,000 724,600 Ending retained earnings $ 1,348, 400 S 935,000 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 $350,000.) e. The average sale period. (The inventory at the beginning of last year totaled $600,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $2,790,000.) 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 $1,715,000.) 2. For both this year and last year: a. Present the balance sheet in common-size format. b. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Reg 2B 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 $350,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $600,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) 9. The total asset turnover. (The total assets at the beginning of last year were $2,790,000.) (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 $1,715,000.) (Round your answers to 2 decimal places.) This Year Last Year a. Working capital b. Current ratio c. Acid-test ratio d. Average collection period e. Average sale period f. Operating cycle 9. Total asset turnover h. Debt-to-equity ratio fi. Times interest earned ratio Equity multiplier days days days days days days Req Req 2A > Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets % % % % Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 12% Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and equity % % % % Complete this question by entering your answers in the tal Reg 1 Reg 2 Req3 Req 4 Req Calculate the project profitability index for each product. (Round Product A Product B Project profitability index