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 1,710,000 820,000 Total liabilities 1,330,000 Stockholders' equity Common stock, $20 par Retained earnings 820,000 790,000 1,610,000 $3,797,600 $2,940,000 1,267,600 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 Net operating income Interest expense 966,000 108,000 586,000 108,000

Explanation / Answer

Requirement 1(e): Book Value per share of common stock: This year Last year Total Assets 3797600 2940000 Less: Outside Liabilities 1710000 1330000 Book Value of shares 2087600 1610000 Beginning Book Value 1610000 1610000 Average Book Value 1848800 1610000 Number of shares (820000/20) 41000 41000 Book Value per share of common stock: 45.09 39.27 Requirement 2©: Return on total assets: This year Last year Total Assets Ending Balance 3797600 2940000 Beginning Balance 2940000.00 2900000.00 Average 3368800 2920000 Net Income 600600 334600 Return on total assets 17.8 11.5 Requirement 2(d): Return on Equity: This year Last year Shareholders Equity Ending Balance 2087600 1610000 Beginning Balance 1610000 1600000 Average 1848800 1605000 Net Income 600600 334600 Return on Equity 32.5 20.8

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