Problem 15-18 Common-Size Statements and Financial Ratios for a Loan Application [LO15-1, LO15-2, LO15-3, LO15-4]

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 $690,000 long-term loan from Gulfport State Bank, $195,000 of which will be used to bolster the Cash account and $495,000 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 Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 146,000 $ 340,000 16,000 490,000 785,000 41,000 724,000 1,135,000 38,000 2,043,000 2,229,400 1,672,000 1,480,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders Equity $4,272,400 3,152,000 Liabilities Current liabilities Bonds payable, 12% $ 895,000 $ 410,000 850,000 850,000 Total liabilities 1,745,000 1,260,000 Stockholders' equity: Common stock, $15 par Retained earnings 880,000 1,647,400 880,000 1,012,000 1,892,000 $4,272,400 $3,152,000 Total stockholders' equity 2,527,400 Total liabilities and equity