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 $700,000 long-term loan from Gulfport State Bank, $200,000 of which will be used to bolster the Cash account and $500,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow: Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory. Prepaid expenses Total current assets Plant and equipment, net Total assets Sabin Electronics Comparative Balance Sheet This Year Last Year $ 150,000 $ 350,000 8 17,000 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 stockholders' equity 737,000 1,145,000 38,000 2,070,000 2,300,800 $ 4,370,800 $900,000 900,000 1,800,000 890,000 1,688,800 2,570,800 $ 4,370,800 500,000 795,000 42,000 1,704,000 1,530,000 $ 3,234,000 $ 420,000 900,000 1,320,000 890,000 1,024,000 1,914,000 $ 3,234,000 Sales Sabin Electronics Comparative Income Statement and Reconciliation Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year $ 6,000,000 4,075,000 1,925,000 693,000 Last Year $ 4,950,000 3,650,000 1,300,000 588,000 1,232,000 712,000 108,000 108,000 1,124,000 604,000 337,200 181,200 786,800 422,800 130,000 109,000 656,800 1,024,000 313,800 710,200 $ 1,680,800 $ 1,024,000 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. 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 $450,000.) e. The average sale period. (The inventory at the beginning of last year totaled $700,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $3,194,000.) h. The debt-to-equity ratio. 1. The times interest earned ratio.. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,904,000.) 2. For both this year and last year: a. Present the balance sheet in common-size format for both this year and last year. b. Present the income statement in common-size format down through net income for both this year and last year. 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 $450,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) e. The average sale period. (The inventory at the beginning of last year totaled $700,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) g. The total asset turnover. (The total assets at the beginning of last year were $3,194,000.) (Round your answers to 2 decimal places.) h. The debt-to-equity rati. (Round your answers to 2 decimal places.) 1. 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 $1,904,000.) (Round your answers to 2 decimal places.) a. Working capital This Year Last Year b. Current ratio c. Acid-test ratio d. Average collection period days days e. Average sale period days days days days f. Operating cycle g. Total asset turnover h. Debt-to-equity ratio 1. Times interest eamed ratio Equity multiplier Show less A Present the balance sheet in common-size format for both this year and last year. (Round your answers to 1 decimal place.) Sabin Electronics Common-Size Balance Sheets 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 This Year Last Year % % % % % % Req 1 Req 2A Req 2B Present the income statement in common-size format down through net income for both this year and last year. (Round your answers to 1 decimal place.) Sales Cost of goods sold Sabin Electronics Common-Size Income Statements Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes Net income This Year Last Year % % %