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problem: System computers make bulk purchases of small computers, stock them in conveniently located warehouses, & ships them into its chain of retail stores. System's balance sheet as of December 31, 2006, is shown here [millions of dollars]:


mce_markernbsp; 3.5

Accounts payable

mce_markernbsp; 9.0



Notes payable






Total current assets


Total current liabilities

$ 35.5

Net fixed assets


Mortgage loan




Common stock




Retained earnings


Total assets


Total liabilities and equity


Sales for 2006 were 3.50 million dollar, while net income for the year was 20.5 million dollar. System pay dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Suppose that all ratios remain constant.

[A] If sales are projected to increase by 70 million dollar, or 20%, during 2007.

[B] Estimate System's projected external capital requirement if the increase in sales is expected to be carried out without any expansion of fixed assets.

[C] How much can sales grow above 2006 of $350 million without requiring any additional funds?


Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919507

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