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 $560,000 long-term loan from Gulfport State Bank, $130,000 of which will be used to bolster the Cash account and $430,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow. Assets Current assets: Sabin Electronics Comparative Balance Sheet This Year Last Year 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 $ 94,000 e $ 210,000 24,000 555,000 1,005,000 26,000 1,680,000 1,665,400 $ 3,345,400 $ 830,000 900,000 1,730,000 750,000 865,400 1,615,400 $ 3,345,400 360,000 655,000 28,000 1,277,000 1,430,000 $ 2,707,000 $ 490,000 900,000 1,390,000 750,000 567,000 1,317,000 $ 2,707,000 Sales Sabin Electronics Comparative Income Statement and Reconciliation Cost of goods sold This Year $ 5,300,000 3,935,000 Last Year $ 4,530,000 3,510,000 1,020,000 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 1,365,000 665,000 560,000 700,000 460,000 108,000 108,000 592,000 352,000 177,600 105,600 414,400 246,400 116,000 95,000 298,400 151,400 567,000 415,600 $ 865,400 $ 567,000 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 $310,000.) e. The average sale period. (The Inventory at the beginning of last year totaled $560,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $2,600,000.) 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 $1,307,000.) 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.