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.The amount of working capitalThe current ratioThe acid-test ratioThe average collection period (The accounts receivable at the beginning of last year totaled $250,000)The average sales period (The inventory at the beginning of last year totaled $500,000)The operating cycleThe total asset turnover. (The total assets at the beginning of last year were $2,420,000)The debt-to-equity ratioThe times interest earned ratioThe equity multiplier (The total stockholder’s equity at the beginning of last year totaled $1,420,000)2. For both this year and last yearA. Present the balance sheet in common-size formatB. Present the income statement in common-size format down through net income Could you please help me answer Question 10, 2A, and 2B? 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 asever cash shortage. For this reason, it is requesting a $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used tomodernize equipment. The company's financial statements for the two recent years follow:Sabin ElectronicsComparative Balance SheetAssetsCurrent Assets:CashMarketable SecuritiesAccounts Receivable, NetInventoryPrepaid ExpensesTotal Current AssetsPlant and Equipment, NetTotal AssetsLiabilities and Stockholder's EquityLiabilities:Current LiabilitiesBonds Payable, 12%Total LiabilitiesThis Year Last Year70,0000150,00018,000480,000300,000950,000 600,00020,00022,0001,520,000 1,090,0001,480,000 1,370,0003,000,000 2,460,000800,000 430,000600,000 600,0001,400,000 1,030,000Stockholder's EquityCommon Stock, $15 ParRetained EarningsTotal Stockholder's Equity1,600,000 1,430,000Total Liabilities and Stockholder's Equity 3,000,000 2,460,000750,000 750,000850,000 680,000 Sabin ElectronicsComparative Income StatementSalesCost of Goods SoldGross MarginSelling and Administrative ExpensesNet Operating IncomeInterest ExpenseNet Income Before TaxesIncome Taxes (30%)Net Income Before TaxesCommon DividendsNet Income RetainedBeginning Retained EarningsEnding Retained EarningsThis Year5,000,0003,875,0001,125,000653,000472,00072,000400,000120,000280,000110,000170,000680,000850,000Last Year4,350,0003,450,000900,000548,000352,00072,000270,00084,000196,00095,000101,000579,000680,000

1. To assist in approaching the bank about the loan, paul has asked you to compute the following…

Answered: To assist

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.

The amount of working capital
The current ratio
The acid-test ratio
The average collection period (The accounts receivable at the beginning of last year totaled $250,000)
The average sales period (The inventory at the beginning of last year totaled $500,000)
The operating cycle
The total asset turnover. (The total assets at the beginning of last year were $2,420,000)
The debt-to-equity ratio
The times interest earned ratio
The equity multiplier (The total stockholder’s equity at the beginning of last year totaled $1,420,000)