Long Term Financing Options for Bertin, Inc.
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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.
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Solution Summary
The solution discusses long term financing options for Bertin, Inc. including total debt and not considering any financing feedback effects.
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a. What was Bertin's total debt in 2007?
Total Debt= Total Assets-Common stock-Retained earnings-Accounts ...
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