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 $530,000 long-term loan from Gulfport State Bank, $115,000 of which will be used to bolster the Cash account and $415,000 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 Current assets: $ 82000 180,000 21,000 330,000 625,000 25,000 16.000 980.000 Accounts receivable, net Prepaid expenses Total current assets Plant and equipment, net 1,600.000 1,570 200 1,181,000 Total assets $3.170.200 2.581,000 Liabilities and Stockholders Equity Liablities Current liablities Bonds payable, 12% S 815.000 460,000 750,000 Total liablities 1,565.000 Stockholders' equity Common stock, $15 par Retained eamings 720,000 885.200 651,000 1.371,000 $3,170.200 2.581,000 Total stockholders equity 1,605.200 Total liablities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year $5.150.000 4.440,000 Last Year Sales Cost of goods sold Gross margin Seling and administrative expenses 1,245.000 659.000 960,000 554.000 Net operating income Interest expense 586.000 90000 406,000 316,000 4,800 496.000 Net income before taxes Income taxes (30%) Net income Common dividends 347 200 113.000 221,200 92,000 Net income retained Beginning retained earnings 234.200 651,000 521,800 Ending retained eamings $ 885.200 651,000

Explanation / Answer

1(a) Earning per share: This Year Last Year Net income 3,47,200 2,21,200 Total No. of shares 48,000 48,000 Earning per share 7.23 4.61 1(b) Dividend Yield ratio: This ratio indicates dividend received as percentage of market price of share. This Year Last Year Total Dividend 1,13,000 92,000 Dividend per share 2.35 1.92 Market Price per share 55.00 50.00 Dividend Yield Ratio (%) 4.28% 3.83% 1(c) Dividend Payout Ratio: This ratio indicates that out of total earning how much is distributed as dividend. This Year Last Year Total Earning 3,47,200 2,21,200 Total Dividend 1,13,000 92,000 Dividend Payout ratio (%) 32.55% 41.59% 1(d) Price-earning ratio: This Year Last Year Market Price per share                     55.00                     50.00 Earning per share 7.23 4.61 Price-earning ratio (Times) 7.60 10.85 1(e) Book Value per share: This Year Last Year Total stockholders' Equity /Net Assets 16,05,200 13,71,000 Total No. of shares 48,000 48,000 Book Value per share 33.44 28.56 2(a) Gross Margin Percentage: This Year Last Year Gross Margin 12,45,000 9,60,000 Sales 51,50,000 44,40,000 Gross Margin (%) 24.17% 21.62% 2(b) Net Profit Margin Percentage: This Year Last Year Net Profit 3,47,200 2,21,200 Sales 51,50,000 44,40,000 Net Profit margin Margin (%) 6.74% 4.98% 2(c) Return on total assets: This Year Last Year Opening Total Asset 25,81,000 23,90,000 Closing Total Asset 31,70,200 25,81,000 Average Total Asset 28,75,600 24,85,500 Net income before interest (net of tax @ 30%)               3,47,200               2,21,200 Return on total assets (%) 12.07% 8.90% 2(d) Return on equity: This Year Last Year Opening Stockholders' equity 13,71,000 13,61,000 Closing Stockholders' equity 16,05,200 13,71,000 Average Stockholders' equity 14,88,100 13,66,000 Net Income 3,47,200 2,21,200 Return on equity (%) 23.33% 16.19%

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