Purchase Solution

Calculate: Long-term Financing and Total Debt

Not what you're looking for?

Ask Custom Question

At year-end 2007, total assets for Bertin, Inc. were 1.2 million and accounts payable were $375,000. Sales, which in 2007 were $2.5 million, are expected to increase by 25% in 2008. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Bertin typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2007, and retained earnings were $295,000. Bertin plans to sell new common stock in the amount of $75,000. The firm's profit margin on sales is 6%; 40% of earnings will be paid out as dividends.

a. What was Bertin's total debt in 2007?

b. How much new, long-term debt financing will be needed in 2008? (Hint: AFN - New Stock = New long-term debt). Do not consider any financing feedback effects.

Purchase this Solution

Solution Summary

This solution provides a clear, step by step response which illustrates how to calculate both total debt and long-term debt for the company in question. An Excel file is also attached which outlines the calculations which are required. By clicking on the cells in the Excel file, you can see exactly how the calculations were derived.

Solution Preview

Please see attached file for the calculations.

a. What was Bertin's total debt in 2007?

Total assets = $1,200,000

Current Liabilities (=Accounts payable) = $375,000

Shareholders' equity
Common stock = $425,000
Retained earnings = $295,000
Total shareholders' equity = $720,000 = $425,000 + $295,000.

Total Assets = Current Liabilities + Long Term Debt+ Shareholders' equity
Therefore, Long Term Debt = $105,000 =$1,200,000 - $375,000. - ...

Purchase this Solution


Free BrainMass Quizzes
Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.