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: This Year Last Year 94,000 Sabin Electronics Comparative Balance Sheet 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, 124 Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 555,000 1,005,000 26,000 1,680,000 1,665,400 $ 3,345,400 $ 210,000 24,000 360,000 655,000 28,000 1,277,000 1,430,000 $ 2,707,000 $ 830,000 900,000 1,730,000 490,000 900,000 1,390,000 750,000 865,400 1,615,400 $ 3,345,400 750,000 567,000 1,317,000 $ 2,707,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $5,300,000 $ 4,530,000 Cost of goods sold 3,935,000 3,510,000 Gross margin 1,365, 880 1,020,000 Selling and administrative expenses 665,000 560,000 Net operating income 700,000 460,000 Interest expense 108,000 108,000 Net income before taxes 592,000 352,000 Income taxes (304) 177,600 105,600 Net income 414,400 246,400 Common dividends I 116,000 95,000 Net income retained 298,400 151,400 Beginning retained earnings 567,000 415,600 Ending retained earnings $ 865, 480 $ 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, 1/30. All sales are on account. Assume Paul Sabin has asked you to assess his company's profitability and stock market performance. Required: 1. You decide first 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 $45 per share; last year it sold for $40 per share c. The dividend payout ratio. d. The price-earnings ratio. (Assume that the industry norm for the price-earnings ratio is 11) 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 $2,480,000.) 22 Required: 1. You decide first 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 yleld ratio. The company's stock is currently selling for $45 per share; last year it sold for $40 per share c. The dividend payout ratio. d. The price-earnings ratio. (Assume that the industry norm for the price-earnings ratio is 11) 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 $2,480,000) d. The return on equity. (Stockholders' equity at the beginning of last year was $1,307,000.) e, 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 first 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 currently selling for $45 per share; last year it sold for $40 per share. (DE not round intermediate calculations. Round your percentage answers to 1 decimal place (1.0, 0.1234 should be entered as 12.3).) C. The dividend payout ratio. (Do not round intermediate calculations. Round your percentage answers to 1 decimal place Cie., 0.1234 should be entered as 12.3).) d. The price-earnings ratio. (Assume that the Industry norm for the price-earnings ratio is 11.) (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.) This Year Last Year % a. Eamings per share b. Dividend yield ratio c Dividend payout ratio d. Price-earnings ratio e. Book value per share % % % (Required Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 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. (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 $2,480,000.) (Round your percentage answers to 1 decimal place.) d. The return on equity. (Stockholders' equity at the beginning of last year was $1,307,000.) (Round your percentage answe to 1 decimal place.) e. Is the company's financial leverage positive or negative? Show less This Year Last Year % % a. Gross margin percentage 6. Net profit margin percentage a Return on total assets d. Return on equity o. Financial Loverage % % % %