HBM, Inc had sales of $9 million and a net profit margin of 10 percent in 20X0 Management expects sales to grow to $10 8 million and $12 6 million in 20X1 and 20X2, respectively Management wants to know if additional funds will be necessary to finance this anticipated growth Currently, the firm is not operating at full capacity and should be able to sustain a 25 percent increase in sales However, further increases in sales will require $3 million in plant and equipment for every $5 million increase in sales (Note that even if sales increase by less than $5 million, the total amount of $3 million investment in plant and equipment is still required ) The firm's balance sheet is as follows HBM, Incorporated Balance Sheet as of 12 31 X0 Assets Liabilities and Equity Cash $ 1,170,000 Accruals $ 1,800,000 Accounts receivable 2,520,000 Accounts payable 450,000 Inventory 900,000 Notes payable 340,000 Plant and equipment 1,500,000 Long term debt 1,500,000 Equity 2,000,000 $ 6,090,000 $ 6,090,000 Management has followed a policy of distributing at least 70 percent of earnings as dividends Management believes that the percent of sales method of forecasting is sufficient to answer the question, Will outside funding be necessary To use this technique, management has assumed that accounts receivable, inventory, accruals, and accounts payable will vary with the level of sales Cash will not change Prepare projected balance sheets for 20X1 and 20X2 that incorporate any necessary outside financing Any short term funds that are required should be obtained through a loan from the bank, and any excess short term funds should be appropriately invested Any long term financing that is needed should be obtained through long term debt Round your answers to the nearest dollar HBM, Incorporated Balance Sheet as of 12 31 X1 Assets Liabilities and Equity Cash $ Accruals $ Marketable securities Accounts payable Accounts receivable Notes payable Inventory Long term debt Plant and equipment Equity $ $ HBM, Incorporated Balance Sheet as of 12 31 X2 Assets Liabilities and Equity Cash $ Accruals $ Marketable securities Accounts payable Accounts receivable Notes payable Inventory Long term debt Plant and equipment Equity $ $ If the firm did not distribute 70 percent of its earnings, could it sustain the expansion without issuing additional long term debt Round your answer to the nearest dollar If the firm did not distribute 70 percent of its earnings, the maximum possible retained earnings would be $ A change in the dividend policy Select would or would not cover the expansion in plant and equipment If the firm's creditors in part a require a current ratio of 3 1, would that affect the firm's financing in 20X1 and 20X2 If so, what additional actions could the firm take Round your answers to two decimal places According to the forecast in part a , the current ratios in 20X1 and 20X2 are 1 and 1, respectively If the firm's creditors require a current ratio of 3 1, the firm Select will or will not meet the current ratio requirement and Select should or should not take additional actions to low current ratio If the percent of sales forecasts are replaced with the following regression equations Accounts receivable $100,000 0 12 Sales, Inventory $250,000 0 20 Sales, Accruals $150,000 0 07 Sales, Accounts payable $250,000 0 11 Sales, what is the firm's need for outside funding (if any) in 20X1 and 20X2 Round your answers to the nearest dollar Enter your answers as positive values In 20X1 the firm Select will need external or will have excess funds of $ In 20X2 the firm Select will need external or will have excess funds of $ If the firm's creditors in part d required a current ratio of 3 1, would that affect the firm's financing in 20X1 and 20X2 If so, what additional actions could the firm take Round your answers to the nearest dollar If the firm's creditors in part d required a current ratio of 3 1, the maximum amount of current liabilities in 20X1 is $ The forecast indicates that the firm Select would or would not meet the current ratio requirement If the firm's creditors in part d required a current ratio of 3 1, the maximum amount of current liabilities in 20X2 is $ The forecast indicates that the firm Select would or would not meet the current ratio requirement

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HBM, Inc. had sales of $9 million and a net profit margin of 10 percent in 20X0. Management expects sales to grow to $10.8 million

HBM, Inc. had sales of $9 million and a net profit margin of 10 percent in 20X0. Management expects sales to grow to $10.8 million and $12.6 million in 20X1 and 20X2, respectively. Management wants to know if additional funds will be necessary to finance this anticipated growth. Currently, the firm is not operating at full capacity and should be able to sustain a 25 percent increase in sales. However, further increases in sales will require $3 million in plant and equipment for every $5 million increase in sales. (Note that even if sales increase by less than $5 million, the total amount of $3 million investment in plant and equipment is still required.) The firm's balance sheet is as follows:

HBM, Incorporated Balance Sheet as of 12/31/X0
Assets			Liabilities and Equity
Cash	$	1,170,000	Accruals	$	1,800,000
Accounts receivable		2,520,000	Accounts payable		450,000
Inventory		900,000	Notes payable		340,000
Plant and equipment		1,500,000	Long-term debt		1,500,000
			Equity		2,000,000
	$	6,090,000		$	6,090,000

Management has followed a policy of distributing at least 70 percent of earnings as dividends. Management believes that the percent of sales method of forecasting is sufficient to answer the question, "Will outside funding be necessary?" To use this technique, management has assumed that accounts receivable, inventory, accruals, and accounts payable will vary with the level of sales. Cash will not change.

Prepare projected balance sheets for 20X1 and 20X2 that incorporate any necessary outside financing. Any short-term funds that are required should be obtained through a loan from the bank, and any excess short-term funds should be appropriately invested. Any long-term financing that is needed should be obtained through long-term debt. Round your answers to the nearest dollar.

HBM, Incorporated Balance Sheet as of 12/31/X1
Assets		Liabilities and Equity
Cash	$	Accruals	$
Marketable securities		Accounts payable
Accounts receivable		Notes payable
Inventory		Long-term debt
Plant and equipment		Equity
	$		$

HBM, Incorporated Balance Sheet as of 12/31/X2
Assets		Liabilities and Equity
Cash	$	Accruals	$
Marketable securities		Accounts payable
Accounts receivable		Notes payable
Inventory		Long-term debt
Plant and equipment		Equity
	$		$

If the firm did not distribute 70 percent of its earnings, could it sustain the expansion without issuing additional long-term debt? Round your answer to the nearest dollar.

If the firm did not distribute 70 percent of its earnings, the maximum possible retained earnings would be $_____. A change in the dividend policy -Select- would or would not cover the expansion in plant and equipment.
If the firm's creditors in part a require a current ratio of 3:1, would that affect the firm's financing in 20X1 and 20X2? If so, what additional actions could the firm take? Round your answers to two decimal places.

According to the forecast in part a, the current ratios in 20X1 and 20X2 are ___ :1 and ____ :1, respectively. If the firm's creditors require a current ratio of 3:1, the firm -Select- will or will not meet the current ratio requirement and -Select- should or should not take additional actions to low current ratio.
If the percent of sales forecasts are replaced with the following regression equations:

Accounts receivable = $100,000 + 0.12 Sales,

Inventory = $250,000 + 0.20 Sales,

Accruals = $150,000 + 0.07 Sales,

Accounts payable = $250,000 + 0.11 Sales,

what is the firm's need for outside funding (if any) in 20X1 and 20X2? Round your answers to the nearest dollar. Enter your answers as positive values.

In 20X1 the firm -Select- will need external or will have excess funds of $____ . In 20X2 the firm -Select- will need external or will have excess funds of $ ____
If the firm's creditors in part d required a current ratio of 3:1, would that affect the firm's financing in 20X1 and 20X2? If so, what additional actions could the firm take? Round your answers to the nearest dollar.

If the firm's creditors in part d required a current ratio of 3:1, the maximum amount of current liabilities in 20X1 is $ ____ . The forecast indicates that the firm -Select-would or would not meet the current ratio requirement.

If the firm's creditors in part d required a current ratio of 3:1, the maximum amount of current liabilities in 20X2 is $ ____ . The forecast indicates that the firm -Select-would or would not meet the current ratio requirement.