EEM, Inc. has the following balance sheet:
EEM, Incorporated Balance Sheet as of 12/31/X0
Assets Liabilities and Equity
Cash $ 1,000 Accounts payable $ 5,300
Accounts receivable 7,200 Bank note payable 3,200
Long-term assets 4,200 Equity 10,000
Accounts receivable = $3,310 + 0.35 Sales,
Inventory = $2,264 + 0.28 Sales,
Accounts payable = $1,329 + 0.22 Sales.
a. If the firm expects sales of $25,000, what are the forecasted levels of the balance sheet items above?
c. If the firm earns 12 percent on sales after taxes and retains all of these earnings, will it cover its estimated needs for short-term financing?
The solution computes Forecasted Sales and its Affect on Balance Sheet for EEM Inc in excel sheet.