Problem 14-18 Common-Size Statements and Financial Ratios for a Loan Application [LO14-1, LO14-2, LO14-3, LO14-4] 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 $640,000 long-term loan from Gulfport State Bank, $170,000 of which will be used to bolster the Cash account and $470,000 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 Total current assets Plant and equipment, net Total assets. Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 126,000 659,000 1,020,000 34,000 1,839,000 2,084,600 $ 3,923,600 $ 570,000 500,000 1,670,000 830,000 1,423,600 2,253,600 $ 3,923,600 290,000 11,000 440,000 735,000 36,000 1,512,000 1,470,000 $ 2,982,000 $ 440,000 500,000 1,240,000 830,000 912,000 1,742,000 $ 2,982,000 Sabin Electronics Comparative Income Statement and Reconciliation. This Year $ 5,700,000 4,015,000 1,685,000 601,000 1,004,000 Sales Cost of goods sold Gross margin Selling and administrative expenses. Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends. Last Year $ 4,770,000 3,590,000 1,180,000 570,000 604,000 96,000 96,000 908,000 508,000 272,400 152,400 635,600 355,600 124,000. 103,000