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 $590,000 long-term loan from Gulfport State Bank, $145,000 of which will be used to bolster the Cash account and $445,000 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	$	104,000	$	240,000
Marketable securities		0		27,000
Accounts receivable, net		594,000		390,000
Inventory		1,035,000		685,000
Prepaid expenses		26,000		31,000
Total current assets		1,759,000		1,373,000
Plant and equipment, net		1,751,000		1,420,000
Total assets	$	3,510,000	$	2,793,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities	$	845,000	$	520,000
Bonds payable, 12%		700,000		700,000
Total liabilities		1,545,000		1,220,000
Stockholders' equity:
Common stock, $15 par		960,000		960,000
Retained earnings		1,005,000		613,000
Total stockholders equity		1,965,000		1,573,000
Total liabilities and equity	$	3,510,000	$	2,793,000

Sabin Electronics

Comparative Income Statement and Reconciliation

This Year

Last Year

Sales

$

5,450,000

$

4,620,000

Cost of goods sold

3,965,000

3,540,000

Gross margin

1,485,000

1,080,000

Selling and administrative expenses

671,000

566,000

Net operating income

814,000

514,000

Interest expense

84,000

84,000

Net income before taxes

730,000

430,000

Income taxes (30%)

219,000

129,000

Net income

511,000

301,000

Common dividends

119,000

98,000

Net income retained

392,000

203,000

Beginning retained earnings

613,000

410,000

Ending retained earnings

$

1,005,000

$

613,000

h.	The debt-to-equity ratio. (Round your answers to 3 decimal places.)

i.	The times interest earned ratio. (Round your answers to 1 decimal place.)

j.	The equity multiplier. (The total stockholders equity at the beginning of last year totaled $1,563,000.) (Round your answers to 2 decimal places.)

2.	For both this year and last year:

a.

Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

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	0.0		0.0
Total liabilities and equity	0.0	%	0.0	%

b.	Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

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	%