Common-Size Statements and Financial Ratios for a Loan Application LO15-1, LO15-2, LO15-3, LO15-4 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 $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 to modernize equipment. The company's financial statements for the two most recent years follow:.Sabin ElectronicsComparative Balance Sheet This Year Last YearAssets Current assets: Cash $ 70,000 $ 150,000 Marketable securities 0 18,000 Accounts receivable, net 480,000 300,000 Inventory 950,000 600,000 Prepaid expenses 20,000 22,000 Total current assets 1,520,000 1,090,000 Plant and equipment, net 1,480,000 1,370,000 Total assets $ 3,000,000 $ 2,460,000Liabilities and Stockholders Equity Liabilities: Current liabilities $ 800,000 $ 430,000 Bonds payable, 12% 600,000 600,000 Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par 750,000 750,000 Retained earnings 850,000 680,000 Total stockholders’ equity 1,600,000 1,430,000 Total liabilities and equity $ 3,000,000 $ 2,460,000 Sabin ElectronicsComparative Income Statement and Reconciliation This Year Last YearSales $ 5,000,000 $ 4,350,000 Cost of goods sold 3,875,000 3,450,000 Gross margin 1,125,000 900,000 Selling and administrative expenses 653,000 548,000 Net operating income 472,000 352,000 Interest expense 72,000 72,000 Net income before taxes 400,000 280,000 Income taxes (30%) 120,000 84,000 Net income 280,000 196,000 Common dividends 110,000 95,000 Net income retained 170,000 101,000 Beginning retained earnings 680,000 579,000 Ending retained earnings $ 850,000 $ 680,000 During the past year, the company introduced several new product lines and raised the selling prices on a number of 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, n/30. 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 ratio. (Round your answers to 2 decimal places.)c. The acid-test ratio. (Round your answers to 2 decimal places.)d. The average collection period. (The accounts receivable at the beginning of last year totaled $250,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)e. The average sale period. (The inventory at the beginning of last year totaled $500,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)f. The operating cycle. (Round your answers to 1 decimal place.)g. The total asset turnover. (The total assets at the beginning of last year were $2,420,000.) (Round your answers to 2 decimal places.)h. The debt-to-equity ratio. (Round your answers to 3 decimal places.)i. The times interest earned ratio. (Round your answers to 1 decimal place.)j. The equity multiplier. (The total stockholders’ equity at the beginning of last year totaled $1,420,000.) (Round your answers to 2 decimal places.)2. For both this year and last year:.a. Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i. e., 0.123 should be entered as 12.3).)b. Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place (i. e., 0.123 should be entered as 12.3).)