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 companys financial statements for the two most recent years follow:

Sabin Electronics
Comparative Balance Sheet
	This Year	Last Year
Assets
Current assets:
Cash	$ 94,000	$ 210,000
Marketable securities	0	24,000
Accounts receivable, net	555,000	360,000
Inventory	1,005,000	655,000
Prepaid expenses	26,000	28,000
Total current assets	1,680,000	1,277,000
Plant and equipment, net	1,665,400	1,430,000
Total assets	$ 3,345,400	$ 2,707,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$ 830,000	$ 490,000
Bonds payable, 12%	900,000	900,000
Total liabilities	1,730,000	1,390,000
Stockholders' equity:
Common stock, $15 par	750,000	750,000
Retained earnings	865,400	567,000
Total stockholders equity	1,615,400	1,317,000
Total liabilities and stockholders' equity	$ 3,345,400	$ 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	1,365,000	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 (30%)	177,600	105,600
Net income	414,400	246,400
Common dividends	116,000	95,000
Net income retained	298,400	151,400
Beginning retained earnings	567,000	415,600
Ending retained earnings	$ 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.

i. 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 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.

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. (Round your answers to 2 decimal places.) c. The acid-test ratio. (Round your answers to 2 decimal places.) d. The average collection period. (The accounts receivable at the beginning of last year totaled $310,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) e. The average sale period. (The inventory at the beginning of last year totaled $560,000.) (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place. Use 365 days in a year.) g. The total asset turnover. (The total assets at the beginning of last year were $2,600,000.) (Round your answers to 2 decimal places.) h. The debt-to-equity ratio. (Round your answers to 2 decimal places.) i. The times interest earned ratio. (Round your answers to 2 decimal places.) j. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,307,000.) (Round your answers to 2 decimal places.) Present the balance sheet in common-size format for both this year and last year. (Round your answers to 1 decimal place.) 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.)