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 $690,000 long-term loan from Gulfport State Bank, $195,000 of which will be used to bolster the Cash account and $495,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow: Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 146,000 S340,000 16,000 724,000 490,000 1,135,000 785,000 38,000 41,000 2,043,000 1,672,000 2,229,400 1,480,00o Total current assets Plant and equipment, net Total assets $4,272,400 s3,152,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% $ 895,000 $410,000 850,000 850,000 Total liabilities 1,745,000 1,260,000 Stockholders' equity: Common stock, $15 par Retained earnings 840,000 840,000 1,687,400 1,052,000 2,527,400 1,892,000 $4,272,400 s3,152,000 Total stockholders' equity Total liabilities and equity Sabin ElectronicS Comparative Income Statement and Reconciliation This Year Last Year Sales $5,950,000 s4,920,000 3,640,000 Cost of goods sold 4,065,000 Gross margin Selling and administrative expenses Net operating income 1,885,000 1,280,000 691,000 586,000 1,194,000 694,000 102,000 102,000 Interest expense Net income before taxes Income taxes (30%) Net income Common dividends 1,092,000 592,000 327,600 177,600 764,400 414,400 129,000 108,000