MCQs>Finance & Management>Budget And Planning>The Stuff Antique Store has current sales of $12 million and predicts next year's sales will grow to $16 million. Current assets are $3 million and fixed assets are $4 million. The firm's net profit margin is 6 percent after taxes. Presently, Stuff has $800,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Stuff projects that current assets and liabilities will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $600,000. The Stuff Antique Store plans to pay dividends of $400,000 to common shareholders. What are Stuff's total financing needs and discretionary financing needs for the upcoming year?
Budget And Planning MCQs
The Stuff Antique Store has current sales of $12 million and predicts next year's sales will grow to $16 million. Current assets are $3 million and fixed assets are $4 million. The firm's net profit margin is 6 percent after taxes. Presently, Stuff has $800,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Stuff projects that current assets and liabilities will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $600,000. The Stuff Antique Store plans to pay dividends of $400,000 to common shareholders. What are Stuff's total financing needs and discretionary financing needs for the upcoming year?
Answer
Correct Answer: $8.6 million and $.27 million.
Explanation:
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