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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

Sabin Electronics
Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	70,000	$	150,000
Marketable securities		0		18,000
Accounts receivable, net		480,000		300,000
Inventory		950,000		600,000
Prepaid expenses		20,000		22,000
Total current assets		1,520,000		1,090,000
Plant and equipment, net		1,480,000		1,370,000
Total assets	$	3,000,000	$	2,460,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities	$	800,000	$	430,000
Bonds payable, 12%		600,000		600,000
Total liabilities		1,400,000		1,030,000
Stockholders' equity:
Common stock, $15 par		750,000		750,000
Retained earnings		850,000		680,000
Total stockholders equity		1,600,000		1,430,000
Total liabilities and stockholders' equity	$	3,000,000	$	2,460,000

Sabin Electronics
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,000,000	$	4,350,000
Cost of goods sold		3,875,000		3,450,000
Gross margin		1,125,000		900,000
Selling and administrative expenses		653,000		548,000
Net operating income		472,000		352,000
Interest expense		72,000		72,000
Net income before taxes		400,000		280,000
Income taxes (30%)		120,000		84,000
Net income		280,000		196,000
Common dividends		110,000		95,000
Net income retained		170,000		101,000
Beginning retained earnings		680,000		579,000
Ending retained earnings	$	850,000	$	680,000

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 $250,000).

e. the average sales period. (The inventory at the beginning of last year totaled $500,000).

f. the operating cycle.

g. the total asset turnover. (The total assets at the beginning of last year were $2,420,000).

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 $1,420,000).

2. For both this year and last year:

a. Present the balance sheet in common size format

b. For both this year and last year, present the income statement in common size format down through net income.