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At year-end 2014, total assets for Ambrose Inc. were $1.6 million and accounts payable were $345,000. Sales, which in 2014 were $2.3 million, are
At year-end 2014, total assets for Ambrose Inc. were $1.6 million and accounts payable were $345,000. Sales, which in 2014 were $2.3 million, are expected to increase by 20% in 2015. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Ambrose typically uses no current liabilities other than accounts payable. Common stock amounted to $455,000 in 2014, and retained earnings were $285,000. Ambrose plans to sell new common stock in the amount of $110,000. The firm's profit margin on sales is 4%; 70% of earnings will be retained. How much new long-term debt financing will be needed in 2015?
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