28 Planning for Growth at S&S Air After Chris completed the ratio analysis for SaS Air (see Chep- planning resulted in missed sales, as well as periods when Mark ter 3), Mark and Todd approached him about planning for next and Todd were unable to draw salaries. To this end, they would year's sales. The company had historically used little planning like Christo prepare a financial plan for the next year so the for investment need. As a result, the company experienced some company can begin to address any outside investmentre challenging times because of cash flow problems. The lack of ments. The income statement and balance sheet are shown here: SASAN, Inc. 200 income Statement $30,409 420 Cost of goods sold - 22.224.500 Other apenses - 3,867.500 Depreciation - 1.36680 EBIT "optr-biy profit-> S 3,040, 660 478 240 Interest $ 2,502,420 Taxable income GiBT- Taves (40%). - 1.024 964 Tay Net income HS 1.537A52) Dividends $S60,000 1 Add to retained carnings on 452 - N. income olvidendstaddition ret. earning Is37 YS1:56o ... + 4 +ysu S5 r.E PART a Financial statements and Long Term financial Planning SASANE, Inc. Lebilledes and Equity Current assets Cument habilities $ 441,000 > Accounts payable $ 889,000 7DE 400 Accounts receivable * 2.030.000 Notes payable. 1,037,120 Inventory $ 2.919 000 Total current fiabilities S 2,186,520 Long-term det $ 5,320,000 Total curent assets Fixed assets 7.Rabiula = a 234, Net plant and equipment $16, 122,400 Shareholder equity Common stock $ 350,000 Retained carmings 9.719.920 Total equity CS10.069,920 Total assets $18,308,920 Total fiabilities and equity $18,308,920 QUESTIONS 1. Calculate the internal growth rate und sustainable powth ale for S&S Air. What do these numbers mean? 2 SAS Air is planning for a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company's sales increase at this growth rate? Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount However, fixed assets must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a com- pany has a "staircase" or "lumpy fixed cost structure. ALBUme SAS Air is currently producing at 100 percent capacity. As a result, to increase production, the company must set up an entirely new line at a cost of 55000.000. Calculate the new EFN with this assump- tion. What does this imply about capacity utilization for the company next year' Scanned by CamScanner