How large of a sales increase can Pierce Furnishings achieve?
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Pierce Furnishings generated $2.0 million in sales during 2005, and its year-end total assets were $1.5 million. Also at year-end 2005 current liabilities were $500,000, consisting of $200,000 of notes payable $200,000 of accounts payable and $100,000 of accruals. Looking ahead to 2006, the company estimates that its assets must increase by 75 cents for every $1 increase in sales. Pierce's profit margin in 5 percent and its payout ration is 60 percent How large a sales increase can the company achieve without having to raise funds externally?
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The solution is comprised of an explanation on how to determine the increase in sales such that no external financing is needed. All required formulas and the mathematical calculations are included.
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Pierce Furnishings generated $2.0 million in sales during 2005, and its year-end total assets were $1.5 million. Also at year-end 2005 current liabilities were $500,000, consisting of $200,000 of notes payable $200,000 of accounts payable and $100,000 of accruals. Looking ahead to 2006, the company estimates that its assets ...
Purchase this Solution
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