This Year Last Year

Working capital = Current assets - Current liabilities 720,000 660,000

Current ratio = Current assets / Current liabilities 1.9 2.53

Acid test ratio = (Current Assets-Inv-prepaid)/ Current liabilities 0.68.75 1.088

Average collection period=365/Receivable turnover (in days) 28.47 days 23.07 days

Average sale period 73 days 58.21 days

Debt to equity ratio 0.875 0.72

times interest earned ratio 6.56 4.89

3. Paul Sabin has also gathered the following financial data and ratios that are typical of companies in the electronics industry:

Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5

Acid-test ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3

Average collection period . . . . . . . . . . . . . . . . . . 18 days

Average sale period . . . . . . . . . . . . . . . . . . . . . . 60

days Debt-to-equity ratio . . . . . . . . . . . . . . . . . . . . . . 0.90

Times interest earned ratio . . . . . . . . . . . . . . . . 6.0

Comment on the results of your analysis in (1) and (2) above and compare Sabin Electronics performance to the benchmarks from the electronics industry. Do you think that the company is likely to get its loan application approved?