Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several

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 $630,000 long-term loan from Gulfport State Bank, $165,000 of which will be used to bolster the Cash account and $465,000 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 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 119,000 280,000 640,000 1,075,000 30,000 10,000 430,000 725,000 35,000 Total current assets Plant and equipment, net ,864,000 1,933,600 1,480,000 1,460,000 Total assets $3,797,600 2,940,000 Liabilities and Stockholders Equity Liabilities Current liabilities Bonds payable, 12% 810,000 430,000 900,000 900,000 1.710000 1,330,000 Total liabilities Stockholders' equity: Common stock, $20 par 820,000 1,267,600 820,000 Retained eamings Total stockholders' equity Total liabilities and equity 790,000 1,610,000 $3,797,600 2,940,000 2.087 6001

Explanation / Answer

As per policy only first four questions will be

Part 1A

Earnings per share = net income / shares outstanding

This year = 600600/41000 = 14.65

Last year = 334600/41000 = 8.16

Part 1B

Dividend yield ratio = Dividends per share / market price per share

This year = (123000/41000) / 55 = 5.5%

Last year = (102000 / 41000) / 50 = 5.0%

Part 1C

Dividend payout ratio = dividend per share / earnings per share

This year = (123000/41000) / 14.65 = 3/14.65 =20.5%

Last year = (102000/41000) / 8.16 = 2.49 / 8.16 = 30.5%

Part 1D

Price-earning ratio = market price per share / earnings per share

This year = 55 / 14.65 = 3.75

Last year = 50 / 8.16 = 6.13

Part 1E

Book value per share = total stockholders' equity / number of shares outstanding =

This year = 2087600/41000 = 50.92

Last year = 1610000/41000 = 39.27

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