2. For both this year and last year: a. Present the balance sheet in common-size

Question

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.

ation.com Connect Paul Sabin Organized Sabin Electronics 10 Years Chapter 15 Homework Saved Help Save & Exit Submit Check my work 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 $520,000 long-term loan from Gulfport State Bank, $110,000 of which will be used to bolster the Cash account and $410,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow: 10 points Sabin Electronics Comparative Balance Sheet Thia Year Last Year Assets Current assetsi eBook $170,000 20,000 320,000 615,000 24,000 1,149,000 1,350,000 2,499,000 $78,000 Caah Marketable securities Accounts receivable, net Inventory Prepaid expenses 503,000 965,000 22,000 1,568,000 1,503,900 3,071,800 Print Total current asaets Plant and equipment, net Total assets Liabilities and Stockholders Equity Liabilities: References Current liabilities Bonds payable, 12% S 810,000 700,000 1,510,000 S 450,000 700,000 1,150,000 Total liabilities Stockholders' equity: Cammon stock, $15 par Retained earninga 710,000 851,800 1,561,800 3,071,800 710,000 639,000 1,349,000 2,499,000 Total stockholders equity Total liabilities and stockholders equity Sabin Electronics Comparative Income Statenent and Reconciliation This Year Last Year Sales Cost of goods sold Groas margin Selling and administrative expenses Net operating income Interest expense Net income before taxee $5,100,000 $4,410,000 3,470,000 940,000 552.000 388,000 84,000 3,895,000 1,205,000 657,000 548,000 84,000 464,000 304 000 Graw Next

Explanation / Answer

1) a) The Amount of working Capial :

Gross working capital is equal to current assets. Working capital is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capitaldeficit.

This Year : 1054000, Last year : 1050000

b) Current ratio

The current ratio is mainly used to give an idea of the company's ability to pay back its liabilities (debt and accounts payable) with its assets (cash, marketable securities, inventory, accounts receivable)

This year : 2.30, Last Year : 3.44

c) The Acid Test Raio

  The basic formula for the acid-test ratio is: ATR = (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities. Short-term investments include marketable securities that can be liquidated quickly

so here , This Year 0.72 , Last Year : 1.09

d) Average collection Period

The average collection period is the approximate amount of time that it takes for a business to receive payments owed in terms of accounts receivable. so the formula is :
Average Collection Period = (days*AR)/ Credit Sales

e) Average Sales Period

The average payment period (APP) is defined as the number of days a company takes to pay off credit purchases. It is calculated as accounts payable / (total annual purchases / 360).

f) The operating cycle

The operating cycle is the average period of time required for a business to make an initial outlay of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods.

g) Total Asset Turnover

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing net sales with average total assets

h) The debt to equity ratio

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity

i) The times interest earned ratio

The times interest earned ratio is calculated by dividing income before interest and income taxes by the interest expense

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