3 value 10.00 points Paul Sabin organized Sabin Electronics 10 years ago to prod

Question

3 value 10.00 points 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 S 280,000 10,000 430,000 725,000 35,000 0 640,000 1,075,000 30,000 Total current assets Plant and equipment, net 1,864,000 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 S 430,000 900,000 900,000 Total liabilities 1,710,000 1,330,000 Stockholders' equity Common stock, $20 par Retained earnings 820,000 1,267,600 820,000 790,000 1,610,000 $3,797,600 $2,940,000 Total stockholders' equity 2,087,600 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold $5,650,000 $4,740,000 3,580,000 4,005,000 1,645,000 679,000 1,160,000 574,000 Gross margin Selling and administrative expenses

Explanation / Answer

This Year Last Year Earning Per Share (a/b)               14.65                 8.16 Net Income (a)         6,00,600         3,34,600 No of Shares (b)            41,000            41,000 Dividend Yield ratio (c/d)           5.45 %           4.98 % Dividend per share (c )                 3.00                 2.49 Market price of stock (d) 55 50 Dividend Payout Ratio (e/f)         20.48 %         30.48 % Dividend paid (e )         1,23,000         1,02,000 Net Income (f )         6,00,600         3,34,600 P/E Ratio (g/h)                 3.75                 6.13 Market price of stock(g) 55 50 Earning Per share (h)               14.65                 8.16 Book Value per share (i/j)               50.92               39.27 Total Shareholders equity (i)      20,87,600      16,10,000 No of Shares(j)            41,000            41,000 Gross Margin Percentage (k/l)         29.12 %         24.47 % Gross Margin (k)      16,45,000      11,60,000 Sales (l)      56,50,000      47,40,000 Ner Profit Percentage (m/n)         10.63 %           7.06 % Net income (m)         6,00,600         3,34,600 Sales (n)      56,50,000      47,40,000 Return on Total Assets(o/p)         15.82 %      113.81 % Net Income (o )         6,00,600         3,34,600 Total Assets (p)      37,97,600         2,94,000 Return on Equity (q/r)         28.77 %         20.78 % Net Income (q)         6,00,600         3,34,600 Shareholders equity (r )      20,87,600      16,10,000 EPS         14.65           8.16 % change in EPS         79.50 % EBIT 966000 586000 % change in EBIT 64.85 % DFL=% changein EPS/% Change in EBIT =79.5%/64.85%           1.23 Change in financial leverage is positive

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