The Acme Corp has a balance sheet as of the end of the year as follows: Cash $ 5
ID: 2763529 • Letter: T
Question
The Acme Corp has a balance sheet as of the end of the year as follows: Cash $ 5,000 Accounts payable $15,000 Accounts receivable 20,000 Notes payable 10,000 Inventories 40,000 Total current liabilities. Total current assets $ 65,000 Long-term debt 30,000 Fixed assets, net 50,000 Stockholders' equity 60,000 Total assets $115,000 Total liabilities and equity $115,000 Last year, the firm had sales of $150,250. This year the company expects sales to increase 25 percent, to generate earnings after tax of $17,250, and to pay a dividend of $5,000. Hudson operated its fixed assets at 85 percent capacity last year. What additional financing will be needed to support the sales increase (Assume all current assets increase and accounts payable increase with sales
Explanation / Answer
Acme corp Balance sheet at the end of the year Assets Amt $ Liabilities& Equitues Amt $ Cash 5,000 Accounts Payable 15,000 AR 20,000 Note Payable 10,000 Inventories 40,000 Tital Current Laibilities 25,000 Total Current Assets 65,000 LT Debt 30,000 Fixed Assets 50,000 Total Liability 55,000 StockholdersÉquity 60,000 Total Assets 115,000 Total Liabilities& Equitues 115,000 Current Sales =S= 150,250 Sales Increase@25%=delta S= 37,563 Current Assets =A= 65,000 A/S= 0.433 0.1664 Sppontaneous Current Laibility( Only accounts payable)=L= 15,000 L/S= 0.0998 Increases Sales =S1= 187,813 Net Earning expected 17,250 Net Profit Margin =m= 9.2% Dividen paid = 5,000 dividend Payout ratio=d=5000/17250= 29.0% External Financing Needed = A/S*delta S-L/S*delta S-m*S1*(1-d) =0.433*37563-0.0998*37563-0.092*187813*0.71 = 248 So External Funding needed =$248
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