Problem 14-18 Common-Size Statements and Financial Ratlos 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. Sabin Electronics Comparative Balance Sheet This Year Last Year $ 184,800 594, see 1,035,880 26,wee 1,759,800 1,751, eee $ 3,510,880 $ 240, 880 27,000 390,000 685, eee 31,eee 1,373,800 1,420,000 $ 2,793,880 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Pr 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 $ $ 845,880 700,wee 1,545,00 528,888 700, eee 1,220,000 780, eee 1,185,000 1,965,80 $ 3,510,00 780,000 793, eee 1,573, eee $ 2,793, eee Sabin Electronics Comparative Income Statement and Reconciliation This Year Sales $ 5,450, eee Cost of goods sold 3,965, eee Gross margin 1,485, eee Selling and administrative expenses 671, eee Net operating income 814,000 Interest expense 84,000 Net income before taxes 730, eee Income taxes (30%) 219,000 Net income 511, eee Common dividends 119,00 Net income retained 392,80 Beginning retained earnings 793, see Ending retained earnings $ 1,185, eee Last Year $ 4,620, eee 3, 540, eee 1, e82, eee 566,080 514,000 84,880 438,888 129, see 301, eee 98,080 203,880 590, 880 $ 793,888 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 3/10, 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 recelvable 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. 9. The total asset turnover. (The total assets at the beginning of last year were $2,690,000.) h. The debt-to-equity ratio. 1. The times Interest earned ratio. J. The equity multiplier. (The total stockholders' equilty 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. Reg 1 Reg 2A Red 20 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 acid-test ratio. (Round your answers to 2 decimal places.) d. The average collection period. (The accounts receivable 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.) i. The times interest earned ratio. (Round your answers to 2 decimal places.) j. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1,563,000.) (Round your answers to 2 decimal places.) Show less This Year Last Year a. Working capital b. Current ratio c. Acid-test ratio d. Average collection period e. Average sale period f. Operating cycle g. Total asset turnover h. Debt-to-equity ratio 1. Times interest earned ratio j. Equity multiplier days days days days days days Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 2B Present the balance sheet in common-size format. (Round your answers to 1 decimal place.) Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets 0.0 0.0 Plant and equipment, net Total assets 0.0% 0.01% Liabilities and Stockholders' Equity Liabilities: Current liabilities % % Bonds payable 12 Total liabilities 0.0 0.0 Stockholders' equity Common stock. $15 par Retained earnings Total stockholders' equity 0.0 0.0 Total liabilities and equity 0.01% 0.01% Complete this question by entering your answers in the tabs below. Reg 1 Red 2A Req 2B % Present the income statement in common-size format down through net income. (Round your answers to 1 decimal place.) Sabin Electronics Common-Size Income Statements This Year Last Year Sales Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxes Net income 0.0 % 0.0 %