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 $640,000 long-term loan from Gulfport State Bank, $170,000 of which will be used to bolster the Cash account and $470,000 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 Sabin Electronics Comparative Balance Sheet This Year Last Year $ 126,000 $ 290,000 11,000 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 stockholders' equity 659,000 1,020,000 34,000 1,839,000 2,084,600 $ 3,923,600 $ 870,000 800,000 1,670,000 830,000 1,423,600 2,253,600 $ 3,923,600 440,000 735,000 36,000 1,512,000 1,470,000 $ 2,982,000 $ 440,000 800,000 1,240,000 830,000 912,000 1,742,000 $ 2,982,000 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 $ 5,700,000 4,015,000 1,685,000 681,000 Last Year $ 4,770,000 3,590,000 1,180,000 576,000 1,004,000 604,000 96,000 96,000 908,000 508,000 272,400 152,400 635,600 355,600 124,000 103,000 511,600 252,600 912,000 659,400 $ 1,423,600 $ 912,000 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 $390,000.) e. The average sale period. (The inventory at the beginning of last year totaled $640,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $2,942,000.) 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 $1,732,000.) 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. Req 1 Req 2A Req 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 $390,000.) (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 $640,000.) (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 $2,942,000.) (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 $1,732,000.) (Round your answers to 2 decimal places.) a. Working capital b. Current ratio c. Acid-test ratio This Year Last Year 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 i. Times interest earned ratio j. Equity multiplier < Req 1 Req 2A > Show less Req 1 Req 2A Req 2B Present the balance sheet in common-size format for both this year and last year. (Round your answers to 1 decimal place.) Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Sabin Electronics Common-Size Balance Sheets 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 2B > Complete this question by entering your answers in the tabs below. 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 % % % % < Req 2A Req 2B >