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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modemize equipment. The company's financial statements for the two most recent years follow: Sabin Electronics Comparative Balance Sheet This Year Last Year $ $ Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 70,000 0 480,000 950,000 20,000 150,000 18,000 300,000 600,000 22,000 Total current assets Plant and equipment, net 1,520,000 1,480,000 $3,000,000 1,090,000 1,370,000 $2,460,000 Total assets Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% $ $ 800,000 600,000 1,400,000 430,000 600,000 1,030,000 Total liabilities Stockholders' equity: Common stock, $15 par Retained earings Total stockholders' equity 750.000 850,000 1,600,000 $3,000,000 750,000 680,000 1.430,000 $2,460,000 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Sales $5,000,000 Cost of goods sold 3,875,000 Last Year $ 4,350,000 3,450,000 MacBook Pro Sabin Electronics Comparative Income Statement and Reconciliation This Year Sales $5,000,000 Cost of goods sold 3,875,000 Last Year $4,350,000 3,450,000 Gross margin Selling and administrative expenses 1,125,000 653,000 900,000 548,000 Net operating income Interest expense 472,000 72,000 352,000 72,000 Net income before taxes Income taxes (30%) 400,000 120,000 280,000 84,000 Net income Common dividends Net income retained Beginning retained earnings 280,000 196,000 110,000 95,000 170,000 101.000 680,000 579,000 $ 850,000 $ 680,000 FESTES Ending retained earnings 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, 1/30. 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. This Year Last Year Working capital MacBook Pro This Year Last Year Current ratio c. The acid-test ratio. (Round your answers to 2 decimal places.) This Year Last Year Acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $250,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.) This Year Average collection period Last Year days e. The average sale period. (The inventory at the beginning of last year totaled $500,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year) This Year days Average sale period Last Year days MacBook Pro Operating cycle days d ays The total asset tumover (The total assets at the beginning of last year were $2.420,000.) IR your answers to 2 decimal places.) This Year Last Year Total asset tumover h. The debt-to-equity ratio. (Round your answers to 3 decimal places.) This Year Last Year Debt-to-equity ratio The times interest eamed ratio (Round your answers to 1 decimal place This Year Last Year MacBook Pro Als DAIGAN