Question: Please answer all section if possible and please show work. Thanks Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic

Please answer all section if possible and please show work. Thanks

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 $580,000 long-term loan from Gulfport State Bank, $140,000 of which will be used to bolster the Cash account and $440,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

Sabin Electronics
Comparative Balance Sheet
This Year Last Year
Assets
Current assets:
Cash $ 100,000 $ 230,000
Marketable securities 0 26,000
Accounts receivable, net 581,000 380,000
Inventory 1,025,000 675,000
Prepaid expenses 26,000 30,000
Total current assets 1,732,000 1,341,000
Plant and equipment, net 1,759,600 1,450,000
Total assets $ 3,491,600 $ 2,791,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities $ 840,000 $ 510,000
Bonds payable, 12% 650,000 650,000
Total liabilities 1,490,000 1,160,000
Stockholders' equity:
Common stock, $20 par 770,000 770,000
Retained earnings 1,231,600 861,000
Total stockholders equity 2,001,000 1,631,000
Total liabilities and equity $ 3,491,600 $ 2,791,000
Sabin Electronics
Comparative Income Statement and Reconciliation
This Year Last Year
Sales $ 5,400,000 $ 4,590,000
Cost of goods sold 3,955,000 3,530,000
Gross margin 1,445,000 1,060,000
Selling and administrative expenses 669,000 564,000
Net operating income 776,000 496,000
Interest expense 78,000 78,000
Net income before taxes 698,000 418,000
Income taxes (30%) 209,400 125,400
Net income 488,600 292,600
Common dividends 118,000 78,000
Net income retained 370,600 195,600
Beginning retained earnings 861,000 665,400
Ending retained earnings $ 1,231,600 $ 861,000

During the past year, the company introduced several new product lines and raised the selling prices on a number of old product lines in order to improve its profit margin. The company also hired a new sales manager, who has expanded sales into several new territories. Sales terms are 2/10, n/30. All sales are on account.

Assume that Paul Sabin has asked you to assess his companys profitability and stock market performance.

Required:
1.

You decide first to assess the companys stock market performance. For both this year and last year, compute:

a.

The earnings per share. There has been no change in common stock over the last two years.(Round your answers to 2 decimal places.)

b.

The dividend yield ratio. The companys stock is currently selling for $55 per share; last year it sold for $51 per share. (Do not round intermediate calculations. Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

c.

The dividend payout ratio. (Round intermediate calculations to 2 decimal places. Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

d.

The price-earnings ratio. (Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.)

e.

The book value per share of common stock. (Round your answers to 2 decimal places.)

2.

You decide next to assess the companys profitability. Compute the following for both this year and last year:

a.

The gross margin percentage.(Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

b.

The net profit margin percentage.(Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

c.

The return on total assets. (Total assets at the beginning of last year were $2,570,000.) (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

d.

The return on equity. (Stockholders equity at the beginning of last year was $1,621,000.) (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

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