Foundations Of Finance
Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 12, Problem 2.3MC
Summary Introduction

Case summary:

Envision that you simply were enlisted as of late as a money related examiner for a relatively new, exceedingly utilized ski producer found within the foothills of Colorado’s Rough Mountains. Person X's firm makes as it were one item, a state-of-the-art snowboard. Up to this point the company has been working without much quantitative information of the trade and budgetary dangers it faces. Ski season fair finished, in any case, so the president of the company has begun to center more on the budgetary viewpoints of overseeing the trade. He has set up a assembly for another week with the CFO, person M, to talk about things such as the business and financial dangers confronted by the company A the following step, He would like to decide the break-even point in units of yield for the company. One of his solid focuses has been that he simply continuously plan supporting work papers that appear how he arrived at his conclusions. He know Maria would like to see these work papers to encourage her audit of his work.

To determine: The income statement and verify the calculation.

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Stevens Textile Corporation's 2019 financial statements are shown below Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 1,080   Accounts payable $ 4,320 Receivables 6,480   Accruals 2,880 Inventories 9,000   Line of credit 0    Total current assets $16,560   Notes payable 2,100 Net fixed assets 12,600      Total current liabilities $ 9,300       Mortgage bonds 3,500       Common stock 3,500       Retained earnings 12,860    Total assets $29,160      Total liabilities and equity $29,160 Income Statement for December 31, 2019 (Thousands of Dollars) Sales $36,000 Operating costs 34,000    Earnings before interest and taxes $ 2,000 Interest 160    Pre-tax earnings $ 1,840 Taxes (25%) 460 Net income $ 1,380 Dividends (40%) $    552 Addition to retained earnings $ 828 Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 20% in the next year but will finance…
At year-end 2019, Wallace Landscaping’s total assets were $2.30 million, and its accounts payable were $430,000. Sales, which in 2019 were $2.9 million, are expected to increase by 20% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $630,000 in 2019, and retained earnings were $330,000. Wallace has arranged to sell $180,000 of new common stock in 2020 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2020. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 5%, and 50% of earnings will be paid out as dividends. What was Wallace's total long-term debt in 2019? Round your answer to the nearest dollar. $   What were Wallace's total liabilities in…
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