(percent of sales forecasting) last year, sales for sports enterprise corporation (sec) were 12,000,000. Several balance sheet items vary directly with sales increases, as follows:
Cash = 3%, accounts payable by 10%, inventory by 15%, fixed assets by 25% and other accruals by 5%, accounts receivable by 20%.
The net profile margin for is 6%, and the firm pays out an annual dividend equal to 25% of net income. The latest balance sheet is
Assets Liabilities and owners equity
Cash 360,000 Accounts payable 1,200,000
Accounts receivable 2,400,000 Accruals 600,000
Inventory 1,800,000 Short term loan 800,000
Total current assets 4,560,000 Total current liabilities 2,600,000
Net fixed assets 3,000,000 Long term debt 1,000,000
Total assets 7,560,000 Stockholders equity 3,960,000
Total liabilities and equity 7,560,000
A) If sales increase by 25% to 15,000,000 next year, what additional financing is needed?
B) Assume that the additional financing needed is acquired by increasing the short term loan. Create a projected balance sheet for next year for SEC.