James Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.5 million. Also, at year-end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.75 for every $1.00 increase in sales. James' profit margin is 3%, and its retention ratio is 35%. How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.
James Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.5 million. Also, at year-end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.75 for every $1.00 increase in sales. James' profit margin is 3%, and its retention ratio is 35%. How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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James Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.5 million. Also, at year-end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.75 for every $1.00 increase in sales. James' profit margin is 3%, and its retention ratio is 35%.
How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.
Transcribed Image Text:The image is a spreadsheet that outlines financial projections and formulas for a business. Here is a detailed transcription of the data:
Column A contains labels and descriptions, while column B contains numerical values:
1. **Sales (S₀):** $2,000,000
2. **Rate of asset growth:** 75.00%
3. **Total assets A₀:** $1,500,000
4. **Profit margin:** 3.00%
5. **Retention ratio:** 35.00%
6. **Current liabilities L₀:** $500,000
7. **Notes payable:** $200,000
8. **Accounts payable:** $200,000
9. **Accrued liabilities:** $100,000
Cells A12 to A21 describe various financial projections and calculated elements:
- **Projected increase in assets**
- **Spontaneous increase in liabilities**
- **Increase in retained earnings**
Cells B12 to B13 contain formulas:
- Formula in B12: `(S₁ - S₀)`
- Formula description in B13 for **Spontaneous increase in liabilities**: Based on the projected sales.
Other descriptions include:
- **Next Year's Sales (S₁)**
- **Increase in Sales**
Column E and F note fields labeled "Formulas," showing N/A for non-applicable formulas or missing data calculations.
The spreadsheet demonstrates basic financial forecasting by providing a snapshot of expected growth and useful ratios, which assist in projecting future financial needs and profitability.
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