Question

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 $560,000 long-term loan from Gulfport State Bank, $130,000 of which will be used to bolster the Cash account and $430,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow: Sabin Electronics Comparative Balance Sheet This Year Last Year $ 94,000 $ Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 555,000 1,005,000 26,000 210,000 24,000 360,000 655,000 28,000 Total current assets Plant and equipment, net 1,680,000 1,665,400 1,277,000 1,430,000 Total assets $3,345,400 $ 2,707,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% $ $ 830,000 900,000 490,000 900,000 Total liabilities 1,730,000 1,390,000 Stockholders' equity: Common stock, $15 par Retained earnings 870,000 745,400 870,000 447,000 Total stockholders' equity 1,615,400 1,317,000 Total liabilities and equity $3,345,400 $ 2,707,000

Answer 1

Common Size balance Sheet
			This Year	Last Year
Assets
Current Assets:
Cash			2.81%	7.76%
Marketable Securities			0.00%	0.89%
Accounts receivable, Net			16.59%	13.30%
Inventory			30.04%	24.20%
Prepaid expense			0.78%	1.03%
Total Current assets			50.22%	47.17%
Plant and equipment, net			4.98%	52.83%
Total Assets			100.00%	100.00%
Liabilities and Stockholder's equity:
Liabilities:
Current liabilities			24.81%	18.10%
Bonds payable 12%			26.90%	33.25%
Total Liabilities			51.71%	51.35%
Stockholder's equity
Common Stock at $15			26.01%	32.14%
Retained earnings			22.28%	16.51%
Total Stockholders' equity			48.29%	48.65%
Total Liabilities and Equity			100.00%	100.00%