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 companys financial statements for the two most recent years follow:

Sabin Electronics
Comparative Balance Sheet
	This Year	Last Year
Assets
Current assets:
Cash	$ 146,000	$ 340,000
Marketable securities	0	16,000
Accounts receivable, net	724,000	490,000
Inventory	1,135,000	785,000
Prepaid expenses	38,000	41,000
Total current assets	2,043,000	1,672,000
Plant and equipment, net	2,229,400	1,480,000
Total assets	$ 4,272,400	$ 3,152,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$ 895,000	$ 410,000
Bonds payable, 12%	850,000	850,000
Total liabilities	1,745,000	1,260,000
Stockholders' equity:
Common stock, $15 par	880,000	880,000
Retained earnings	1,647,400	1,012,000
Total stockholders equity	2,527,400	1,892,000
Total liabilities and stockholders' equity	$ 4,272,400	$ 3,152,000

Sabin Electronics
Comparative Income Statement and Reconciliation
	This Year	Last Year
Sales	$ 5,950,000	$ 4,920,000
Cost of goods sold	4,065,000	3,640,000
Gross margin	1,885,000	1,280,000
Selling and administrative expenses	691,000	586,000
Net operating income	1,194,000	694,000
Interest expense	102,000	102,000
Net income before taxes	1,092,000	592,000
Income taxes (30%)	327,600	177,600
Net income	764,400	414,400
Common dividends	129,000	108,000
Net income retained	635,400	306,400
Beginning retained earnings	1,012,000	705,600
Ending retained earnings	$ 1,647,400	$ 1,012,000

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 $440,000.)

e. The average sale period. (The inventory at the beginning of last year totaled $690,000.)

f. The operating cycle.

g. The total asset turnover. (The total assets at the beginning of last year were $3,112,000.)

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 $1,882,000.)

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.