Question

Current assets Net fixed assets Total assets $4.0 4.0 Accounts payable Notes payable $0.8 1.0 Accrued wages and taxes 0.2 Long-term debt 1.5 Common equity Retained earnings 1.5 3.0 $8.0 Total liabilities and equity $8.0 You have determined the following facts: (1) last year's sales were $10 million; (2) the company will pay out 40 percent of earnings as dividends; (3) a profit margin of 3 percent is projected; (4) fixed assets were used to full capacity; and (5) all assets as well as spontaneous liabilities as shown on the balance sheet are expected to grow proportionally with sales. Further, your boss estimates she will need to raise $2 million externally by issuing new debt or common stock next year. If the above assumptions hold, what rate of sales growth is your boss expecting?

          Current assets
Net fixed assets
Total assets
$4.0
4.0
Accounts payable
Notes payable
$0.8
1.0
Accrued wages and taxes
0.2
Long-term debt
1.5
Common equity
Retained earnings
1.5
3.0
$8.0
Total liabilities and equity
$8.0
You have determined the following facts: (1) last year's sales were $10 million; (2) the company will
pay out 40 percent of earnings as dividends; (3) a profit margin of 3 percent is projected; (4) fixed
assets were used to full capacity; and (5) all assets as well as spontaneous liabilities as shown on the
balance sheet are expected to grow proportionally with sales. Further, your boss estimates she will
need to raise $2 million externally by issuing new debt or common stock next year. If the above
assumptions hold, what rate of sales growth is your boss expecting?

Current assets
Net fixed assets
Total assets
4.0
4.0
Accounts payable
Notes payable0.8
1.0
Accrued wages and taxes
0.2
Long-term debt
1.5
Common equity
Retained earnings
1.5
3.0
8.0
Total liabilities and equity8.0
You have determined the following facts: (1) last year's sales were 10 million; (2) the company will
pay out 40 percent of earnings as dividends; (3) a profit margin of 3 percent is projected; (4) fixed
assets were used to full capacity; and (5) all assets as well as spontaneous liabilities as shown on the
balance sheet are expected to grow proportionally with sales. Further, your boss estimates she will
need to raise2 million externally by issuing new debt or common stock next year. If the above
assumptions hold, what rate of sales growth is your boss expecting?

Added by Margarita G.

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