9) What is the impact of sales growth on Brook Plumbing's borrowing needs?

A)The business has high long-term sales growth, which is a potential borrowing cause, but it has no seasonal sales peak. B)The business has long-term sales growth and a seasonal sales peak, both of which are potential borrowing causes. C)The business has no long-term sales growth and no seasonal sales peak, so there is no borrowing caused by sales growth. D)The business has both long-term sales growth and a seasonal sales peak, which reduces its need to borrow.

Aging

Balance Sheet

Quick Cash Flow

March 31 June 30 Days from Date of Invoice Total Invoices Outstanding Days from Date of Invoice Total Invoices Outstanding 0-30 31-60 61-90 90+ Total accounts receivable $ 250,000 310,000 130,000 100,100 0-30 31-60 61-90 90+ Total accounts receivable $ 360,000 330,000 70,000 40.000 $ 790,100 $ 800,000 September 30 December 31 Days from Date of Invoice Total Invoices Outstanding Days from Date of Invoice 0-30 31-60 61-90 90+ Total accounts receivable $ 300,000 310,000 125,500 60,000 0-30 31-60 61-90 90+ Total accounts receivable Total Invoices Outstanding $ 345,000 205,000 185,000 50,400 $ 795,500 $ 785,400 20Y3 20Y2 20Y1 $ $ $ ASSETS Current assets Cash and equivalents Accounts receivable Inventory Other current assets Total current assets 97 885 110 785 1,075 40 2,010 154 770 902 44 1,870 1,020 23 2,025 335 327 Fixed assets Gross fixed assets Less: Accumulated depreciation Net fixed assets 117 331 100 231 89 218 238 Other noncurrent assets 95 TOTAL ASSETS $ 2,325 $ 2,200 $ 2,358 $ 473 528 143 LIABILITIES AND EQUITY Current liabilities Accounts payable Accrued expenses Other current liabilities Notes payable Current portion,LTD Total current liabilities 99 136 91 592 62 1,354 551 155 117 490 68 1,381 486 66 1,322 Long-term debt 143 209 277 Other noncurrent liabilities 35 33 Owners' equity 793 636 663 TOTAL LIABILITIES AND EQUITY $ 2,325 $ 2,200 $ 2,358 2042 2043 157 20 Net profit Plus: Depreciation, amortization expense Plus (or less): A Working investment Equals: Cash after operating cycle 102 12 198 312 Plus (or less): A Gross fixed assets Equals: Cash after capital investment cycle (4) 304 0 Less: Dividends declared Equals: Cash available for all debt repayment 0 304 (66) (66) Less: Current portion long-term debt (prior year) Equals: Cash available for other debt repayment (68)| 236 Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment BEGINNING ENDING 885 770 1,020 902 551 528 155 143 1,1991 ,001 Beginning working investment Less: Ending working investment Equals: A Working investment 1,199 1,001 198 20Y2 BEGINNING ENDING Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment 20Y3 BEGINNING ENDING Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment March 31 June 30 Days from Date of Invoice Total Invoices Outstanding Days from Date of Invoice Total Invoices Outstanding 0-30 31-60 61-90 90+ Total accounts receivable $ 250,000 310,000 130,000 100,100 0-30 31-60 61-90 90+ Total accounts receivable $ 360,000 330,000 70,000 40.000 $ 790,100 $ 800,000 September 30 December 31 Days from Date of Invoice Total Invoices Outstanding Days from Date of Invoice 0-30 31-60 61-90 90+ Total accounts receivable $ 300,000 310,000 125,500 60,000 0-30 31-60 61-90 90+ Total accounts receivable Total Invoices Outstanding $ 345,000 205,000 185,000 50,400 $ 795,500 $ 785,400 20Y3 20Y2 20Y1 $ $ $ ASSETS Current assets Cash and equivalents Accounts receivable Inventory Other current assets Total current assets 97 885 110 785 1,075 40 2,010 154 770 902 44 1,870 1,020 23 2,025 335 327 Fixed assets Gross fixed assets Less: Accumulated depreciation Net fixed assets 117 331 100 231 89 218 238 Other noncurrent assets 95 TOTAL ASSETS $ 2,325 $ 2,200 $ 2,358 $ 473 528 143 LIABILITIES AND EQUITY Current liabilities Accounts payable Accrued expenses Other current liabilities Notes payable Current portion,LTD Total current liabilities 99 136 91 592 62 1,354 551 155 117 490 68 1,381 486 66 1,322 Long-term debt 143 209 277 Other noncurrent liabilities 35 33 Owners' equity 793 636 663 TOTAL LIABILITIES AND EQUITY $ 2,325 $ 2,200 $ 2,358 2042 2043 157 20 Net profit Plus: Depreciation, amortization expense Plus (or less): A Working investment Equals: Cash after operating cycle 102 12 198 312 Plus (or less): A Gross fixed assets Equals: Cash after capital investment cycle (4) 304 0 Less: Dividends declared Equals: Cash available for all debt repayment 0 304 (66) (66) Less: Current portion long-term debt (prior year) Equals: Cash available for other debt repayment (68)| 236 Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment BEGINNING ENDING 885 770 1,020 902 551 528 155 143 1,1991 ,001 Beginning working investment Less: Ending working investment Equals: A Working investment 1,199 1,001 198 20Y2 BEGINNING ENDING Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment 20Y3 BEGINNING ENDING Change in working investment Accounts receivable (net) Plus: Inventory Less: Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment