Question
Great Subs believes it can increase sales by 50% without any increase in net fixed assets. Earnings after tax are expected to be $2,000. The
Great Subs believes it can increase sales by 50% without any increase in net fixed assets. Earnings after tax are expected to be $2,000. The company pays no dividends. What additional financing will Subs need to finance this growth? Subs balance sheet currently is as follows: Cash $ 2,500 Accounts Payable $ 5,600 Accounts Rec. 4,400 Notes Payable 10,000 Inventory 6,000 Long-term Debt 15,000 Fixed Assets, net 47,700 Stockholders Equity 30,000 $60,600 $60,600 a. $3,350 surplus -- no additional financing needed b. $1,650 c. $3,650 d. None of the answers is correct.
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