Groff Graphics Company owns and operates a small chain of sportswear stores loca
ID: 2485748 • Letter: G
Question
Groff Graphics Company owns and operates a small chain of sportswear stores located near colleges and universities. Groff has experienced significant growth in recent years. The following data are available forGroff:
Required:
1. Calculate how much Groff's sales, net income, and assets have grown during these 3 years. Round your answers to the nearest whole percent.
2. How has Groff financed its asset growth? Enter "a", "b", or "c".
a) increase in retained earnings and a decrease in current liabilities.
b) increase in retained earnings and an increase in current liabilities.
c) increase in retained earnings and in increase in expenses.
3. Is Groff's liquidity is adequate? (yes/no)___________________
4. Why is interest expense growing? Enter "a", "b", or "c".
a) Because retained earnings is increasing.
b) Because short-term notes payable in increasings.
c) Because accounts payable is increasing.
Item 6
5. If Groff's sales grow by 25% in 2014, what would you expect net income to be? Round your answer to the nearest dollar. Use your answer in the following calculations.
$___________________
6. If Groff's assets must grow by 25% to support the 25% sales increase and if 50% of net income is paid in dividends, how much capital must Groff raise in 2014? Round your answer to the nearest cent.
$___________________
Groff Graphics Company Consolidated Income Statement (In thousands) Year ended December 31, 2013 2012 2011 Sales $53,322 $42,893 $35,526 Cost of goods sold 32,936 25,682 21,721 Gross margin $20,386 $17,211 $13,805 Other income, net 397 439 421 $20,783 $17,650 $14,226 Costs and Expenses: Selling and administrative $17,857 $14,665 $12,754 Interest 1,356 863 622 Total costs and expenses $19,213 $15,528 $13,376 Income before income taxes $ 1,570 $ 2,122 $ 850 Provision for income taxes 885 746 623 Net income $ 685 $ 1,376 $ 227Explanation / Answer
Answer 1.
Growth rate of Sales in 3 years = 53,322 / 35,526 * 100 = 150%
Growth rate of Net Income in 3 years = 685 / 227 * 100 = 302%
Growth rate of Assets in 3 years = 16,347 / 10,492 * 100 = 156%
Answer 2.
Increase in retained earning and increase in expenses, as retained earning is increasing after giving effect to Expenses.
Answer to 3.
Yes, Groff is liquidate, there are enough amount of Current assets to meet the Current Liabilities.
Answer to 4.
Interet expenses are growing beacuse Short term note payable are increaing year by year.
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