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 $510,000 long-term loan from Gulfport State Bank, $105,000 of which will be used to bolster the Cash account and $405,000 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 3/10, 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. acid test ratio

Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash 74,000 160,000 19,000 Marketable securities 490,000 310,000 Accounts receivable, net Inventory 955,000 605,000 23,000 23,000 Prepaid expenses 1,117,000 1,542,000 Total current assets 1,376,400 1,300,000 Plant and equipment, net Total assets $2,918,400 2,417,000 Liabilities and Stockholders Equity Liabilities Current liabilities 750,000 440,000 Bonds payable, 12% 650,000 650,000 Total liabilities 1,090,000 1,400,000 Stockholders' equity: 720,000 Common stock, $15 par 720,000 607,000 Retained earnings 798.400 Total stockholders' equity 1,518,400 1,327,000 Total liabilities and equity $2,918,400 2,417,000