You have just been hired as a loan officer at San Diego State Bank. Your supervisor has given you a file containing a request from Mobile Company, a manufacturer of auto components, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below: Mobile Company Comparative Balance Sheet This Year Last Year $ 308,100 $ Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses . 918,000 1,340,500 91,300 392,150 106,000 621,000 740,500 76,300 Total current assets Plant and equipment, net 2,657,900 3.442 800 1.935.950 3,098,400 Total assets $ 6,100,700 $ 5,034,350 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable $ $ 1.261,200 1.294,000 2,555,200 755,600 1,094,000 Total liabilities 1.849,600 600.000 2.000.000 600.000 2,000,000 584,750 945.50 Stockholders' equity Preferred stock, 8%, $30 par value Common stock, $40 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 3,545,500 $ 6,100.700 3,184.750 S5034,350 Mobile Company Comparative Income Statement and Reconciliation This Year $5,442,000 4,091,000 Last Year $ 4,262,000 3,181,000 Sales Cost of goods sold 1,351,000 537,000 1,081,000 517,000 Gross margin Selling and administrative expenses Net operating income Interest expense 814,000 131,500 564,000 111,500 682,500 Net income before taxes Income taxes (30%) 204,750 452,500 135,750 Net income 477,750 316,750 Dividends paid Preferred stock Common stock 48,000 69,000 48,000 45,000 Total dividends paid 117.000 93.000 2 360,750 584.750 23.750 361.000 Net income retained Retained earnings, beginning of year Retained earnings, end of year $945,500 $ 584750 Loretta Young, who just two years ago was appointed president of Mobile Company, admits that the company has been inconsistent in its performance over the past several years. But Young argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 27% increase in sales over the last year Young also argues that investors have recognized the Improving situation at Mobile Company, as shown by the Jump in the price of its common stock from $45.00 per share last year to $53.00 per share this year. Young believes that with strong leadership and with the modernized equipment that the $1.000.000 loan will enable the company to buy profits will be even stronger in the future Anxious to impress your supervisor you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Mobiles industry Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Mobile's industry: 2.3 12 Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest earned Price-earnings ratio 31 days 60 days 9.5 % 0.65 5.7 10 Required: 1. You decide first to assess the rate of return that the company is generating. Compute the following for both this year and last year. a. The return on total assets. (Total assets at the beginning of last year were $4,374,000.) (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3.) This year Last year Return on total assets b. The return on common stockholders equity (Stockholders' equity at the beginning of last year totaled $4,519,185. There has been no change in preferred or common stock over the last two years.) (Do not round your intermediate calculations. Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3.) This year Last year Return on common stockholders' equity c. Is the company's financial leverage positive or negative? This year Last year 2. You decide next to assess the well-being of the common stockholders. For both this year and last year, compute: a. The earnings per share (Round your answers to 2 decimal places.) This year Last year Earnings per share b. The dividend yield ratio for common stock (Round your intermediate calculations to 2 decimal places and and your percentage answers to 1 decimal place l... 0.123 is considered as 12.3. b. The dividend yield ratio for common stock. (Round your intermediate calculations to 2 decimal places and and your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3.) This year Last year Dividend yield ratio c. The dividend payout ratio for common stock. (Round your intermediate calculations to 2 decimal places and your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3.) This year Last year Dividend payout ratio d. The price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.) L ast year This year times Price-earnings ratio times b. The current ratio. (Round your answers to 2 decimal places.) This year Last year Current ratio c. The acid-test ratio. (Round your answers to 2 decimal places.) This year Last year Acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $520,000.) (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to the nearest whole number.) This year days Last year days Average collection period e. The average sale period. (The inventory at the beginning of last year totaled $650,000.) (Use 365 days in a year. Round your intermediate calculations to 2 decimal and final answers to the nearest whole number.) This year days Last year d ays Average sale period f. The debt-to-equity ratio. (Round your answe to 2 decimal places.) This year Last year Debt-to-equity ratio g. The times interest eamed (Round your answers to 1 decimal place.) This year Last year Times interest earned