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 $630,000 long-term loan from Gulfport State Bank, $165,000 of which will be used to bolster the Cash account and $465,000 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 $ 119,000 $ 280,000 0 10,000 640,000 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 1,075,000 30,000 1,864,000 1,933,600 $ 3,797,600 $ 810,000 900,000 1,710,000 820,000 1,267,600 2,087,600 $ 3,797,600 430,000 725,000 35,000 1,480,000 1,460,000 $ 2,940,000 $ 430,000 900,000 1,330,000 820,000 790,000 1,610,000 $ 2,940,000 Sales Sabin Electronics Comparative Income Statement and Reconciliation This Year $ 5,650,000 4,005,000 Last Year $ 4,740,000 3,580,000 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 1,645,000 1,160,000 679,000 574,000 966,000 586,000 108,000 108,000 858,000 478,000 257,400 143,400 600,600 334,600 123,000 102,000 477,600 232,600 790,000 557,400 $ 1,267,600 $ 790,000 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 current ratio. b. The acid-test ratio. c. The average collection period. (The accounts receivable at the beginning of last year totaled $380,000.) d. The average sale period. (The inventory at the beginning of last year totaled $630,000.) e. The debt-to-equity ratio. 2. For both this year and last year: Present the income statement in common-size format down through net income for both this year and last year. 2. For both this year and last year: Present the income statement in common-size format down through net income for both this year and last year. Complete this question by entering your answers in the tabs below. Req 1 Req 2 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 current ratio. (Round your answers to 2 decimal places.) b. The acid-test ratio. (Round your answers to 2 decimal places.) c. The average collection period. (The accounts receivable at the beginning of last year totaled $380,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) d. The average sale period. (The inventory at the beginning of last year totaled $630,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) e. The debt-to-equity ratio. (Round your answers to 2 decimal places.) a. Current ratio This Year b. Acid-test ratio c. Average collection period d. Average sale period e. Debt-to-equity ratio days days Last Year days days < Req 1 Req 2 > Show less 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 current ratio. b. The acid-test ratio. c. The average collection period. (The accounts receivable at the beginning of last year totaled $380,000.) d. The average sale period. (The inventory at the beginning of last year totaled $630,000.) e. The debt-to-equity ratio. 2. For both this year and last year: Present the income statement in common-size format down through net income for both this year and last year. Complete this question by entering your answers in the tabs below. Req 1 Req 2 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.) Sabin Electronics Common-Size Income Statements This Year Last Year % % Sales Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxes Net income 0.0 % 0.0 % < Req 1 Req 2 >