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    Ways to double income: Campbell Appliance

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    Suppose you own Campbell Appliance. The store's summarized financial statements for 2008, the most recent year, follow:

    Campbell Appliance
    Income Statement
    Year Ended Dec 31, 2008

    Sales $800 (thousands)
    COGS 660
    Gross Profit 140
    Operating expenses 100
    Net Income $40

    Campbell Appliance
    Balance Sheet
    Dec 31, 2008

    Cash $30
    Inventories 75
    Land and Building, net

    Total assets $465

    Liabilities and Capital:
    Accounts Payable $35
    Note payable 280
    Total liabilities 315
    Owner, capital 150
    Total liabilities and capital $465

    Assume that you need to double net income. To accomplish your goal, it will be very difficult to raise the prices you charge because there is a Best Buy nearby. Also, you have little control over your cost of goods sold because the appliance manufacturers set the price you must pay.

    Identify several strategies for doubling net income.

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    Solution Preview

    The most obvious suggestion is to increase sales volume. Since you cannot control prices or your costs, increasing sales volume is the main strategy. Other less ...