?A firm with sales of $5,000 has the following balance sheet: ? Assets, Liabilities and Equity as of XX/XX/XX Assets Liabilities and Equity Accounts receivable $1,300 Accounts payable $1,200 Inventory 1,600 Long?term debt 2,500 Plant 1,700 Equity 900 $4,600 $4,600 ? ? The firm earns 5 percent on sales and expects sales to rise to $5,500. The increase may require additional financing. Regression analysis is used to estimate accounts receivable,
inventory, and trade accounts (payables). These estimated equations are accounts receivable = $300 + 0.2Sales inventory = $400 + 0.3Sales accounts payable = $200 + 0.3Sales ? Management expects to distribute 20% of earnings. a. Determine the new balance sheet entries for sales of $5,500. b. the firm need external financing to achieve sales of $5,500? c. Construct the pro forma balance sheet for sales of $5,500. Any new financing should be obtained by issuing new long?term debt. Any excess funds should be held in cash.
What will be an ideal response?
a.The forecasts using regression analysis:? Accounts receivable: $300 + (0.2)($5,500) = $1,400 Inventory: $400 + (0.3)($5,500) = $2,050 Accounts payable: $200 + (0.2)($5,500) = $1,400?b.The increase in assets is $550. The increase in liabilities is $200.?The increase in liabilities is insufficient to meet the expansion in assets. The firm will need additional financing of $350.?The firm earns $275 (0.05 x $5,500), distributes 0.20 x $275 = $55, and retains $220, which is insufficient to cover the additional $350 needed. There still exists a shortage of $130.?c.If the firm issues $130 of new long-term debt tocover the shortage, the new projected balance sheet as of XX/XX/XX is? Assets Liabilities and Equity Cash $ 0 Trade accounts $1,400 Accounts receivable 1,400 Long-term debt 2,630 Inventory 2,050 Equity 900 Plant 1,700 Retained earnings 220 $5,150 $5,150
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A claim is ________; an adjustment is ________
A) a goodwill message; a means to an end B) an emotional reaction; a calculated response C) a formal complaint; a settlement of a claim D) an informal complaint; an emotional reaction E) an assertion; a shift in point of view
The modified internal rate of return (MIRR) is a better indicator of a project's true profitability because:
A. only cash flows after payback period are discounted. B. of the assumption of a shorter payback period than the maximum cost recovery time established by firm. C. it assumes that the cash flows are reinvested at the required rate of return. D. of the assumption that the cash flows are reinvested at a risk-free rate. E. the cash flows are discounted at the internal rate of return.
Match the term with its definition.
A. The time required to convert paid-for inventory and accounts receivable into cash B. The number of days, on average, that a company holds inventory C. The number of days, on average, that a business takes to pay its accounts payable D. The number of days, on average, that a firm extends credit to its customers E. A post office box for receiving remittances from customers F. G. The management of current assets and current liabilities
Your supervisor has instructed you to conduct a marketing research effort that will determine how your company's business customer demographics have changed. You have also been instructed to use primary data. You will:
A. gather data from Standard & Poor's General Information File B. develop a mail survey to study your primary market C. employ studies done by the Federal Trade Commission D. make sure you locate Internet information by using a search engine E. ask the National Industrial Conference Board for its latest study