Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several
ID: 2572079 • Letter: P
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 $640,000 long-term loan from Gulfport State Bank, $170,000 of which will be used to bolster the Cash account and $470,000 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 $ 126,000 $290,000 11,000 440,000 735,000 36,000 659,000 1,020,000 34,000 Total current assets Plant and equipment, net 1,839,000 2,084,600 1,512,000 1,470,000 Total assets $3,923,600 2,982,000 Liabilities and Stockholders Equity Liabilities Current liabilities Bonds payable, 12% $ 870,000 S440,000 800,000 800,000 Total liabilities 1,670,000 1,240,000 Stockholders' equity: 690,000 690,000 Common stock, $15 par Retained earnings 1,563,600 2,253,600 $3,923,600 1,052,000 1,742,000 2,982,000 Total stockholders' equity Total liabilities and equityExplanation / Answer
a) Sabin electronics
Common Size Balance Sheets (in %)
For calculating Common size Balance sheet's figures, all the amounts of assets is divided by total assets and then multiplied by 100. Similarly all the amounts of liabilities and equity is divided by total liabilities and equity and then multiplied by 100.
b) Sabin electronics
Common Size Income Statements (Figures in %)
For calculating common size income statements figures of both years sale is assumed to be equal to 100% and thus all other variables such as cost of goods sold, interest expense etc are divided by sales and multiplied by 100.
Particulars This year Last Year Assets Current Assets: Cash 3.2% 9.7% Marketable Securities 0.0% 0.4% Accounts Receivable, net 16.8% 14.8% Inventory 26.0% 24.6% Prepaid Expenses 0.9% 1.2% Total Current Assets 46.9% 50.7% Plant and Equipment, net 53.1% 49.3% Total Assets 100.0% 100.0% Liabilities and Stockholders equity Liabilities: Current Liabilities 22.2% 14.8% Bonds payable, 12% 20.4% 26.8% Total Liabilities 42.6% 41.6% Stockholders Equity: Common Stock, $15 par 17.5% 23.1% Retained earnings 39.9% 35.3% Total Stockholders Equity 57.4% 58.4% Total Liabilities and Equity 100.0% 100.0%