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Paul Sabin organized Sabin Electronics 10 years ago to produce and se several electronic devices on...

Question:

Paul Sabin organized Sabin Electronics 10 years ago to produce and se several electronic devices on which he had secured pateRequired: 1. To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both thRequired: 1. To assist in approaching the bank about the loen, Paul has asked you to compute the following ratios for both th

Paul Sabin organized Sabin Electronics 10 years ago to produce and se 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 $500.000 long-term loan from Gulfport State Bank $150.000 of which w e used to bolster the Cash account and $450,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow Last Year $250,000 28,000 400,000 695,000 32.000 1,405,000 1,470,000 $2.875.000 Sabin Electronics Comparative Balance Sheet This Year Assets Current assets Cash $ 110,000 Marketable securities Accounts receivable, net 607,000 Inventory 1,045,000 Prepaid expenses 30.000 Total current assets 1,792,000 Plant and equipment, net 1,946,400 Total assets $3.738.400 Liabilities and Stockholders Equity Liabilities: Current abilities $ 850,000 Bonda payable, 128 750,000 Total liabilities 1,600,000 Stockholders' equity: Common stock, $15 par 790,000 Retained earnings 1.340400 Total stockholders' equity 2,138,400 Total liabilities and $3,738, 400 stockholdersequity $ 400,000 750,000 1,150,000 790,000 95.000 1,725,000 $2,875,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year $5,500,000 $4,650,000 Cost of goods sold 3,975,000 3,550,000 Gros margin 1,525,000 1,100,000 Selling and administrative 673,000568,000 expenses Net operating income 852,000 $32,000 Interest expense 90,000 90,000 Net Income before taxes 762.000 442,000 Income taxes (305) 229600 132,600 Net Income 533,400 309,400 Common dividends 120.000 99,000 Not income retained 413.400 210,400 Beginning retained earnings 935,000 Ending retained earnings $1,348,400 $ 95.000 724.600 During the past year, the company introduced several new productes and raised the sel ng prices on a number 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 2/10,n30. 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 rata The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $350,000.) e. The average sale period. (The Inventory at the beginning of last year totaled $600,000.) The operating cycle. 9. The total asset turnover (The total assets at the beginning of last year were $2,790,000 h. The debt-to-equity ratio L The times interest earned ratio J. The equity multiplier (The total stockholders' equity at the beginning of last year totaled $1.715,000.) 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 Req 2A Reg 28 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 Plant and equipment, net Total assets 0.0190 .09 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% Total abilities Stockholders' equity Common stock. $15 par Retained earnings Total stockholders' equity 0.01 00 Total lab ties and equity 0.0 0.0
Required: 1. To assist in approaching the bank about the loen, 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 receivable at the beginning of last year totaled $350.000.) e. The average sale period. The Inventory at the beginning of last year totaled $600,000.) The operating cycle. 9. The total asset turnover. (The total assets at the beginning of last year were $2,790,000.) The debt-to-equity ratio The times interest earned ratio J. The equity multiplier. (The total stockholders' equity at the beginning of last year totaled $1.715,000.) 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 Req 2A Reg 28 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 99 Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 Interest expense Net Income before taxes Income taxes Net income no 0.olo < Req 2A Reg 23

Answers

Sabin Electronics
Common Size Balance Sheet
This Year Percent Working Last Year Percent Working
Assets
Cash $               1,10,000.00 3% ($110000/$3738400) $                              2,50,000.00 9% ($250000/$2875000)
Marketable Securities $                                  -   0% $                                  28,000.00 1% ($28000/$2875000)
Accounts Receivable $               6,07,000.00 16% ($607000/$3738400) $                              4,00,000.00 14% ($400000/$2875000)
Inventories $             10,45,000.00 28% ($1045000/$3738400) $                              6,95,000.00 24% ($695000/$2875000)
Prepaid expenses $                   30,000.00 1% ($30000/$3738400) $                                  32,000.00 1% ($32000/$2875000)
Total Current Assets=(A) $             17,92,000.00 48% ($1792000/$3738400) $                            14,05,000.00 49% ($1405000/$2875000)
Net Property,Plant & Equipment=(B) $             19,46,400.00 52% ($1946400/$3738400) $                            14,70,000.00 51% ($1470000/$2875000)
Total Assets=(A)+(B) $             37,38,400.00 100% ($3738400/$3738400) $                            28,75,000.00 100% ($2875000/$2875000)
Liabilities & Stockholder's Equity
Current Liabilities $               8,50,000.00 23% ($850000/$3738400) $                              4,00,000.00 14% ($400000/$2875000)
Bonds Payable 12% $               7,50,000.00 20% ($750000/$3738400) $                              7,50,000.00 26% ($750000/$2875000)
Total Liabilities=(C ) $             16,00,000.00 43% ($1600000/$3738400) $                            11,50,000.00 40% ($1150000/$2875000)
Stockholder's Equity 0%
Common Stock $               7,90,000.00 21% ($790000/$3738400) $                              7,90,000.00 27% ($790000/$2875000)
Retained Earnings $             13,48,400.00 36% ($1348400/$3738400) $                              9,35,000.00 33% ($935000/$2875000)
Total Stockholder's Equity=(D) $             21,38,400.00 57% ($2138400/$3738400) $                            17,25,000.00 60% ($1725000/$2875000)
Total Liabilities & Stockholder's Equity=(C)+(D) $             37,38,400.00 100% ($3738400/$3738400) $                            28,75,000.00 100% ($2875000/$2875000)
Sabin Electronics
Common Size Income Statement
This Year Percent Working Last Year
Sales $             55,00,000.00 100.00 % ($5500000/$5500000)*100 $     46,50,000.00 100.00
Cost of goods sold $             39,75,000.00 72.27 % ($3975000/$5500000)*100 $     35,50,000.00 76.34
Gross Margin $             15,25,000.00 27.73 % ($1525000/$5500000)*100 $     11,00,000.00 23.66
Selling & Administrative Expenses $               6,73,000.00 12.24 % ($673000/$5500000)*100 $        5,68,000.00 12.22
Net operating income $               8,52,000.00 0.15 % ($852000/$5500000)*100 $        5,32,000.00 0.11
Interest Expense $                   90,000.00 0.02 % ($90000/$5500000)*100 $           90,000.00 0.02
Income Before Taxes $               7,62,000.00 13.85 % ($762000/$5500000)*100 $        4,42,000.00 9.51
Income Tax Expense $               2,28,600.00 0.04 % ($228600/$5500000)*100 $        1,32,600.00 0.03
Net Income $               5,33,400.00 9.70 % ($533400/$5500000)*100 $        3,09,400.00 6.65
.

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