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 $550,000 long-term loan from Gulfport State Bank, $125,000 of which will be used to bolster the Cash account and $425,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

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 $300,000.)

e. The average sale period. (The inventory at the beginning of last year totaled $550,000.)

f. The operating cycle.

g. The total asset turnover. (The total assets at the beginning of last year were $2,570,000.)

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 $1,325,000.)

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.

Req 1To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year

Req 2A Present the balance sheet in common-size format for both this year and last year. (Round your answers to 1 decimal place.)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 3/10, n/30. All sales are on account.

Req 2B Present the income statement in common-size format down through net income for both this year and last year. (Round your answers to 1 decimal place.)

Sabin Electronics Comparative Balance Sheet This Year Last Year $ 90,000 0 542,000 995,000 22,000 1,649,000 1,638,000 $ 3,287,000 $ 200,000 23,000 350,000 645,000 27,000 1, 245,000 1,420,000 $ 2,665,000 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 $ $ 825,000 850,000 1,675,000 480,000 850,000 1,330,000 740,000 872,000 1,612,000 $ 3,287,000 740,000 595,000 1,335,000 $ 2,665,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Sales $ 5,250,000 Cost of goods sold 3,925,000 Gross margin 1,325,000 Selling and administrative expenses 663,000 Net operating income 662,000 Interest expense 102,000 Net income before taxes 560,000 Income taxes (30%) 168,000 Net income 392,000 Common dividends 115,000 Net income retained 277,000 Beginning retained earnings 595,000 Ending retained earnings $ 872,000 Last Year $ 4,500,000 3,500,000 1,000,000 558,000 442,000 102,000 340,000 102,000 238,000 94,000 144,000 451,000 $ 595,000 This Year Last Year a. Working capital b. Current ratio c. Acid-test ratio days days days days days days d. Average collection period e. Average sale period f. Operating cycle g. Total asset turnover h. Debt-to-equity ratio i. Times interest earned ratio j. Equity multiplier Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash % % Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets 0.0 0.0 Plant and equipment, net Total assets 0.0 % 0.0 % Liabilities and Stockholders' Equity Liabilities: Current liabilities % % Bonds payable, 12% Total liabilities 0.0 0.0 Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and equity 0.0 0.0 0.0 % 0.0 % Sabin Electronics Common-Size Income Statements This Year Last Year Sales % % 0.0 0.0 Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes 0.0 0.0 0.0 0.0 Income taxes Net income 0.0 % 0.0 %