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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 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 company's financial statements for the two most recent years follow Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 70,000 $ 150,000 18,000 300,000 600,000 22,000 480,000 950,000 20,000 Total current assets Plant and equipment, net 1,520,000 1,480,000 1,090,000 1,370,000 Total assets $3,000,000 2,460,000 Liabilities and Stockholders Equity Liabilities Current liabilities Bonds payable, 12% $ 800,000 $ 430,000 600,000 600,000 Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par Retained earnings 750,000 850,000 750,000 680,000 1,430,000 $3,000,000 2,460,000 Total stockholders' equity 1,600,000 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year $5,000,000 $4,350,000 3,450,000 Cost of goods sold 3,875,000 Gross margin Selling and administrative expenses 900,000 548,000 1,125,000 653,000 472,000 2,000 400,000 Net operating income Interest expense 352,000 72,000 Net income before taxes Income taxes (30%) 280,000 84.000 120,000 280,000 Net income Common dividends 196.000 95.000 110,000 Net income retained Beginning retained earnings 101,000 579,000 170,000 680,000 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. 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. This Year ast Year Working capital