Explore BrainMass

Explore BrainMass

    Funds Needed

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The Booth Company's sales are forecasted to increase from $1,000 in 2007 to $2,000 in 2008. Here is the balance sheet for December 31, 2007.

    Cash 100 Accts Payable 50
    Acc Rec 200 Notes Payable 150
    Inventory 200 Accruals 50
    Net Fixed assets 500 Long-Term Debt 400
    Common Stock 100
    Retained earnings 250

    Total Assets $1,000 Total Liabilities & Equity $1,000

    Booth's fixed assets were used to only 50% of capacity during 2007, but its current assets were at their proper levels. All assets except fixed assets increase at the same rate as sales, and fixed assets would also increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 5%, and its payout ratio will be 60%. What is Booth's additional funds needed for the coming year?

    © BrainMass Inc. brainmass.com October 9, 2019, 8:55 pm ad1c9bdddf

    Solution Preview

    Current assets are $100 (cash) + $200 (accounts receivable) + $200 (inventory) = $500.
    When sales increase from $1,000 to $2,000 the current assets will need to increase to $2,000/$1,000 * $500 = $1,000. This is ...

    Solution Summary

    This solution analyzes the additional funds needed for the incoming year as sales increase.