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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]:

Cash

mce_markernbsp; 3.5

Accounts payable

mce_markernbsp; 9.0

Receivable

  26.0

Notes payable

   18.0

Inventories

  58.0

Accruals

     8.5

Total current assets

$87.5

Total current liabilities

$ 35.5

Net fixed assets

  35.0

Mortgage loan

      6.0

 

 

Common stock

    15.0

 

 

Retained earnings

    66.0

Total assets

$122.5

Total liabilities and equity

$122.5

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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