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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

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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 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 $ 70,000 $ 150,000
Marketable securities 0 18,000
Accounts receivable, net 480,000 300,000
Inventory 950,000 600,000
Prepaid expenses 20,000 22,000
Total current assets 1,520,000 1,090,000
Plant and equipment, net 1,480,000 1,370,000
Total assets $ 3,000,000 $ 2,460,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities $ 800,000 $ 430,000
Bonds payable, 12% 600,000 600,000
Total liabilities 1,400,000 1,030,000
Stockholders' equity:
Common stock, $15 par 750,000 750,000
Retained earnings 850,000 680,000
Total stockholders equity 1,600,000 1,430,000
Total liabilities and equity $ 3,000,000 $ 2,460,000

Sabin Electronics
Comparative Income Statement and Reconciliation
This Year Last Year
Sales $ 5,000,000 $ 4,350,000
Cost of goods sold 3,875,000 3,450,000
Gross margin 1,125,000 900,000
Selling and administrative expenses 653,000 548,000
Net operating income 472,000 352,000
Interest expense 72,000 72,000
Net income before taxes 400,000 280,000
Income taxes (30%) 120,000 84,000
Net income 280,000 196,000
Common dividends 110,000 95,000
Net income retained 170,000 101,000
Beginning retained earnings 680,000 579,000
Ending retained earnings $ 850,000 $ 680,000

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.

f. The operating cycle. (Round your answers to 1 decimal place.)

g.

The total asset turnover. (The total assets at the beginning of last year were $2,420,000.) (Round your answers to 2 decimal places.)

j. The equity multiplier. (The total stockholders equity at the beginning of last year totaled $1,420,000.)(Round your answers to 2 decimal places.)

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