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 $650,000 long-term loan from Gulfport State Bank, $175,000 of which will be used to bolster the Cash account and $475,000 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 $ 130,000 $ 300,000 Marketable securities 0 12,000 Accounts receivable, net 672,000 450,000 Inventory 1,095,000 745,000 Prepaid expenses 34,000 37,000 Total current assets 1,931,000 1,544,000 Plant and equipment, net 2,099,400 1,520,000 Total assets $ 4,030,400 $ 3,064,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 875,000 $ 450,000 Bonds payable, 12% 750,000 750,000 Total liabilities 1,625,000 1,200,000 Stockholders' equity: Common stock, $15 par 840,000 840,000 Retained earnings 1,565,400 1,024,000 Total stockholders equity 2,405,400 1,864,000 Total liabilities and stockholders' equity $ 4,030,400 $ 3,064,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,750,000 $ 4,800,000 Cost of goods sold 4,025,000 3,600,000 Gross margin 1,725,000 1,200,000 Selling and administrative expenses 683,000 578,000 Net operating income 1,042,000 622,000 Interest expense 90,000 90,000 Net income before taxes 952,000 532,000 Income taxes (30%) 285,600 159,600 Net income 666,400 372,400 Common dividends 125,000 104,000 Net income retained 541,400 268,400 Beginning retained earnings 1,024,000 755,600 Ending retained earnings $ 1,565,400 $ 1,024,000 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 $400,000.) e. The average sale period. (The inventory at the beginning of last year totaled $650,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $3,024,000.) 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 $1,854,000.) 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 $400,000.) (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 $650,000.) (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 $3,024,000.) (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 $1,854,000.) (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.) 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 Plant and equipment, net Total assets % % Liabilities and Stockholders Equity Liabilities: Current liabilities % % Bonds payable, % Total liabilities 0.0 0.0 Stockholders equity: Common stock, $15 par Retained earnings Total stockholders equity 0.0 0.0 Total liabilities and equity 0.0 % 0.0 % 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 Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxes Net income 0.0 % 0.0 %