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 $690,000 long-term loan from Gulfport State Bank, $195,000 of which will be used to bolster the Cash account and $495,000 of which will be used to modernize 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 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 $ 146,000 340,000 0 16,000 724,000 490,000 1,135,000 785,000 38,000 2,043,000 2,229,400 $ 4,272,400 $ 895,000 850,000 1,745,000 880,000 1,647,400 2,527,400 $ 4,272,400 41,000 1,672,000 1,480,000 $ 3,152,000 410,000 850,000 1,260,000 880,000 1,012,000 1,892,000 $ 3,152,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year $ 5,950,000 4,065,000 1,885,000 691,000 Last Year $ 4,920,000 3,640,000 1,280,000 Sales 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 586,000 1,194,000 694,000 102,000 102,000 1,092,000 592,000 327,600 177,600 764,400 414,400 129,000 108,000 635,400 306,400 1,012,000 705,600 $ 1,647,400 $ 1,012,000 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 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 $440,000.) e. The average sale period. (The inventory at the beginning of last year totaled $690,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $3,112,000.) 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 $1,882,000.) 2. For both this year and last year: a. Present the balance sheet in common-size format. b. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. 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 $440,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $690,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year were $3,112,000.) (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 $1,882,000.) (Round your answers to 2 decimal places.) This Year a. Working capital 1,148,000 Last Year 1,262,000 b. Current ratio 2.28 4.08 c. Acid-test ratio 0.97 2.02 d. Average collection period 37.24 days 45.03 days e. Average sale period 86.20 days 96.26 days f. Operating cycle 123.44 days 141.29 days g. Total asset turnover 3.20 2.65 h. Debt-to-equity ratio 0.69 0.67 i. Times interest earned ratio 11.71 6.80 j. Equity multiplier 0.81 0.88 Req 1 Req 2A > Show less Req 1 Req 2A Req 2B Present the balance sheet in common-size format. (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 0.0 % % 0.0 0.0 % 0.0 % 0.0 % % 0.0 0.0 % < Req 1 0.0 0.0 0.0 % Req 2B > Req 1 Req 2A Req 2B Present the income statement in common-size format down through net income. (Round your answe Sabin Electronics Common-Size Income Statements Sales This Year Last Year % % 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 2A Req 2B >