11. You are developing next year’s financial plan for Ajax Inc., a medium sized manufacturing company that’s currently operating at 80% of factory’s capacity. The firm is launching a sales promotion that’s expected to generate a sudden 20% increase in revenues starting at the beginning of the new year. Unlike current sales which are virtually all on credit, approximately fifty percent of the new business will be paid in cash. No changes are planned in the company’s operations other than acquiring the resources necessary to support the sales growth. Develop some reasonable planning assumptions for the following balance sheet line items and explain your reasoning for each. (Hint: Which balance sheet items will be effected by an increase in sales proportionately or less than proportionately. Assume any additional cash needed is borrowed.)

Cash Accounts Payable Accounts Receivable Accruals (wage)

Inventory Gross Fixed Assets Debt Accumulated Depreciation Equity