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 $650,000 long-term loan from Gulfport State Bank, $175,000 of which will be used to bolster the Cash account and $475,000 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 $ 130,000 $ 300,000 e 12,000 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 Sales Sabin Electronics 672,000 1,095,000 34,000 1,931,000 2,099,400 $ 4,030,400 450,000 745,000 37,000 1,544,000 1,520,000 $ 3,064,000 $ 875,000 750,000 1,625,000 840,000 1,565,400 2,405,400 $ 4,030,400 $ 450,000 750,000 1,200,000 840,000 1,024,000 1,864,000 $ 3,064,000 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 $ 5,750,000 4,025,000 1,725,000 683,000 1,042,000 Last Year $ 4,800,000 3,600,000 1,200,000 578,000 622,000 90,000 90,000 952,000 532,000 285,600 159,600 666,400 372,400 125,000 104,000 541,400 268,400 1,024,000 755,600 $ 1,565,400 $ 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 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 $400,000.) e. The average sale period. (The Inventory at the beginning of last year totaled $650,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $3,024,000.) h. The debt-to-equity ratio. 1. The times Interest earned ratio. J. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,854,000.) 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.