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 $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 company's financial statements for the two most recent years follow: 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 managet, who has expanded sales into several new teritories, Sales terms are 3/10,n/30. All sales are on account. 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 $340,000.) e. The average sale period. (The inventory at the beginning of last year totaled $590,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year were $2,690,000.) 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 $1,563,000.) 2. For both this year and last year: a. Present the balance sheet in common-size format. b. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. 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. (Round your answers to 2 decimal places.) c. The acld-test ratio. (Round your answers to 2 decimal places.) d. The average collection period. (The accounts recelvable at the beginning of last year totaled $340,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $590,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) 9. The total asset turnover. (The total assets at the beginning of last year were $2,690,000.) (Round your answers to 2 decimal places.) h. The debt-to-equity ratio. (Round your answers to 2 decimal places.) 1. The times interest earned ratio. (Round your answers to 2 decimal places.) 1. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,563,000.) (Round your answers to 2 decimal places.)
