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 $670,000 longterm loan from Gulfport State Bank, $185,000 of which will be used to bolster the Cash account and $485,000 ofwhich will be used to modernize equipment. The company's nancial statements for the two most recent years follow: Sabin Electronics Couparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 133,666 1; 328,888 Marketable securities 8 14,888 Accounts receivable, net 698,888 478,888 Inventory 1,115,888 765,888 Prepaid expenses 34,888 39,888 Total current assets 1,988,888 1,688,888 Plant and equipment, net 2,815,688 1,388,888 Total assets $ 3,995,688 $ 2,988,888 Liabilities and stockholders' Equity Liabilities: Current liabilities $ 885,888 $ 478,888 Bonds payable, 12% 758,888 758,888 Total liabilities 1,635,888 1,226,666 Stockholders' equity: Common stock, $ 28 par 868,888 868,888 Retained earnings 1,588,688 988,888 Total stockholders' equity 2,368,688 1,768,888 Total liabilities and stockholders' equity $ 3,995,539 $ 2,983,999 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,858,888 $ 4,868,888 Cost of goods sold 4,645,868 3,628,688 Gross margin 1,885,888 1,248,888 Selling and administrative expenses 687,868 582,688 Net operating income 1,118,888 658,888 Interest expense 98,868 98,688 Net income before taxes 1,828,888 568,888 Income taxes (38%} 388,468 178,488 Net income 719,688 397,688 Common dividends 127,868 186,688 Net income retained 592,688 291,688 Beginning retained earnings 988,868 616,488 Ending retained earnings $ 1,599,599 $ 998:999 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 2:90, ni'30. All sales are on account. Assume Paul Sabin has asked you to assess his company's protability and stock market performance. Required: 1. You decide rst to assess the company's stock market performance. For both this year and last year, compute: a. The earnings per share. There has been no change in common stock over the last two years. b. The dividend yield ratio. The company's stock is currently selling for $60 per share; last year it sold for $50 per share. c. The dividend payout ratio. d. The priceearnings ratio. (Assume that the industry norm for the priceearnings ratio is 10} e. The book value per share of common stock. 2. You decide next to assess the company's profitability. Compute the following for both this year and last year: a. The gross margin percentage. b. The net profit margin percentage. c. The return on total assets. (Total assets at the beginning of last year were $2,948,000.) d. The return on equity. (Stockholders equity at the beginning of last year was $1,758,000.) 9. Is the company's financial leverage positive or negative? Complete this question by entering your answers in the tabs below. Required 1 Required 2 You decide rst to assess the company's stock market performance. For both this year and last year, compute: a. The earnings per share. There has been no change in common stock over the last two years. (Round your answers to 2 decimal places.) b. The dividend yield ratio. The company's stock is curreny selling for $60 per share; last year it sold for $50 per share. (Do not round intermediate calculations. Round your percentage answers to 1 decimal place.) c. The dividend payout ratio. (Do not round intermediate calculations. Round your percentage answers to 1 decimal place.) d. The pn'ce~eamings ratio. (Assume that the industry norm for the pn'ce-eamings ratio is 10.) (Do not round intermediate calculations. Round your answers to 2 decimal places.) e. The book value per share of common stock. (Round your answers to 2 decimal places.) Show Inc: A This Year Last Year a. Earnings per share 16.73 $ 9.25 b. Dividend yield ratio 4.9 % 4.9 % c. Dividend payout ratio 17.7 % 26.7 % d. Price-earnings ratio 3.59 5.41 e. Book value per shareYou decide next to assess the company's profitability. Compute the following for both this year and last year: a. The gross margin percentage. (Round your percentage answers to 1 decimal place.) b. The net profit margin percentage. (Round your percentage answers to 1 decimal place.) c. The return on total assets. (Total assets at the beginning of last year were $2,948,000.) (Round your percentage answers to 1 decimal place.) d. The return on equity. (Stockholders' equity at the beginning of last year was $1,758,000.) (Round your percentage answers to 1 decimal place.) e. Is the company's financial leverage positive or negative? Show less A This Year Last Year a. Gross margin percentage % b. Net profit margin percentage % c. Return on total assets d. Return on equity e. Financial Leverage