(Actual) December 31, Balance sheet Year 1 Comments Assets Cash $ 450,000 20% increase (assumption) Accounts receivable 2,200,000 20% increase (assumption) Inventories 3,550,000 20% increase (assumption) Total current assets $ 6,200,000 Fixed assets, net $ 1,300,000 No increase (assumption) Total assets (A) $ 7,500,000 Liabilities and Equity Accounts payable (CL) $ 1,400,000 20% increase (assumption) Notes payable 1,100,000 Total current liabilities $ 2,500,000 Long-term debt 500,000 No change (assumption) Stockholders’ equity 4,500,000 Total liabilities and equity $ 7,500,000 Income Statement Year 1 Sales (S) $14,900,000 20% increase (forecasted) Expenses, including interest & taxes 14,000,000 Earnings after taxes (EAT) $ 900,000 Dividends paid (D) 250,000 No change (assumption) Retained earnings $ 650,000 Selected Financial Ratios Current ratio 2.48 times Debt ratio 40.00% Return on stockholders’ equity 20.00% Net profit margin on sales 6.04% Determine the amount of additional financing needed for Year 2 under the following conditions: Increase in Sales Increase in Expenses $2,980,000 $2,800,000 Suppose that the company has excess fixed assets and that no increase in net fixed assets is required as sales are increased. Assume that the company plans to maintain its dividend payments at the same level in Year 2 as in Year 1. Round your answer to the nearest dollar. $
(Actual) December 31, Balance sheet Year 1 Comments Assets Cash $ 450,000 20% increase (assumption) Accounts receivable 2,200,000 20% increase (assumption) Inventories 3,550,000 20% increase (assumption) Total current assets $ 6,200,000 Fixed assets, net $ 1,300,000 No increase (assumption) Total assets (A) $ 7,500,000 Liabilities and Equity Accounts payable (CL) $ 1,400,000 20% increase (assumption) Notes payable 1,100,000 Total current liabilities $ 2,500,000 Long-term debt 500,000 No change (assumption) Stockholders’ equity 4,500,000 Total liabilities and equity $ 7,500,000 Income Statement Year 1 Sales (S) $14,900,000 20% increase (forecasted) Expenses, including interest & taxes 14,000,000 Earnings after taxes (EAT) $ 900,000 Dividends paid (D) 250,000 No change (assumption) Retained earnings $ 650,000 Selected Financial Ratios Current ratio 2.48 times Debt ratio 40.00% Return on stockholders’ equity 20.00% Net profit margin on sales 6.04% Determine the amount of additional financing needed for Year 2 under the following conditions: Increase in Sales Increase in Expenses $2,980,000 $2,800,000 Suppose that the company has excess fixed assets and that no increase in net fixed assets is required as sales are increased. Assume that the company plans to maintain its dividend payments at the same level in Year 2 as in Year 1. Round your answer to the nearest dollar. $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
| (Actual) | ||||
| December 31, | ||||
| Balance sheet | Year 1 | Comments | ||
| Assets | ||||
| Cash | $ 450,000 | 20% increase (assumption) | ||
| Accounts receivable | 2,200,000 | 20% increase (assumption) | ||
| Inventories | 3,550,000 | 20% increase (assumption) | ||
| Total current assets | $ 6,200,000 | |||
| Fixed assets, net | $ 1,300,000 | No increase (assumption) | ||
| Total assets (A) | $ 7,500,000 | |||
| Liabilities and Equity | ||||
| Accounts payable (CL) | $ 1,400,000 | 20% increase (assumption) | ||
| Notes payable | 1,100,000 | |||
| Total current liabilities | $ 2,500,000 | |||
| Long-term debt | 500,000 | No change (assumption) | ||
| 4,500,000 | ||||
| Total liabilities and equity | $ 7,500,000 | |||
| Income Statement | Year 1 | |||
| Sales (S) | $14,900,000 | 20% increase ( |
||
| Expenses, including interest & taxes | 14,000,000 | |||
| Earnings after taxes (EAT) | $ 900,000 | |||
| Dividends paid (D) | 250,000 | No change (assumption) | ||
| $ 650,000 | ||||
| Selected Financial Ratios | ||||
| 2.48 times | ||||
| Debt ratio | 40.00% | |||
| Return on stockholders’ equity | 20.00% | |||
| Net profit margin on sales | 6.04% |
Determine the amount of additional financing needed for Year 2 under the following conditions:
| Increase in Sales | Increase in Expenses |
| $2,980,000 | $2,800,000 |
Suppose that the company has excess fixed assets and that no increase in net fixed assets is required as sales are increased. Assume that the company plans to maintain its dividend payments at the same level in Year 2 as in Year 1. Round your answer to the nearest dollar.
$
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