Tarheel Furniture Company is planning to establish a wholly owned subsidiary to manufacture upholstery fabrics. Tarheel expects to earn $1.1 millions after taxes on the venture during the first year. The president of Tarheel wants to know what the subsidiary’s
Tarheel plans to make all sales on credit. All calculations assume a 365-day year.
| Industry Averages | ||
| Current ratio | 3:1 | |
| Quick ratio | 1.2:1 | |
| Net profit margin ratio | 5% | |
| Average collection period | 30 days | |
| Debt ratio | 44% | |
| Total asset turnover ratio | 2 times | |
| Current liabilities/ |
25% |
Based upon the industry average financial ratios presented above, complete the projected balance sheet for Tarheel’s upholstery subsidiary. In your computations, you should round all numbers to the nearest $1,000.
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