Question
Aaron Brother has the following balance sheet: Current assets $7,000 A/P & Accruals $1,500 Net Property & Plants 3,000 Notes Payables 2,000 Total Assets $10,000
- Aaron Brother has the following balance sheet:
Current assets | $7,000 | A/P & Accruals | $1,500 | |
Net Property & Plants | 3,000 | Notes Payables | 2,000 | |
Total Assets | $10,000 | Common Stock | 1,500 | |
Ret. Earnings | 5,000 | |||
Total Liab. + Equity | $10,000 |
Aaron Brother after-tax profit margin is 10 percent, and the company pays out 40 percent of its earnings as dividends. Its sales this year were $10,000; its assets were used to full capacity and the profit margin and payout ratio are expected to remain constant. The company plans to raise capital using short-term (3-months) loans (or Notes Payables). If sales is expected to grow by 45 percent, what will Aaron Brother's total liability to total assets ratio be after it has raised the necessary capital and financing it with Notes Payables? PLEASE SHOW WORK ON EXCEL!
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