Hearth and Home presently offers 30 day terms to its customers. If Hearth and Home changed its terms to 45 days, and as a result, all customers paid 15 days later than before, what would be the approximate effect on teh company's borrowing needs in 20Y3?

A) borrowing needs would decrease by about $250,000

B) borrowing needs would increase by about $125,000

C) borrowing needs would increase by about $147,000

D) borrowing needs would increase by about $188,000

Hearth and Home

Balance Sheets

(in $000s)

As At June 30:

	20Y3	20Y2	20Y1
ASSETS
Current assets
Cash	$66	$123	$100
Accounts receivable	376	303	240
Inventory	547	461	417
Other current assets	107	70	117
Total current assets	1,096	957	874
Fixed assets	313	257	245
Trademarks and goodwill	107	71	71
TOTAL ASSETS	$1,516	$1,285	$1,190
LIABILITIES AND OWNERS EQUITY
Current liabilities
Current portion-LTD	$67	$67	$67
Notes payable	101	5	0
Accounts payable	244	204	148
Accrued expenses	69	64	57
Other current liabilities	46	28	47
Total current liabilities	527	368	319
Long-term debt	330	397	464
Other noncurrent liabilities	20	19	18
Owners equity	639	501	389
TOTAL LIABILITIES AND OWNERS EQUITY	$1,516	$1,285	$1,190
Working investments	$610	$496	$452

Hearth and Home

Income Statements

(in $000s)

Years Ended June 30:

	20Y3	20Y2	20Y1
Sales	$3,570	$3,000	$2,500
COGS	2,467	2,093	1,773
Gross profit	1,103	907	727
Interest expense	36	33	36
Depreciation expense	60	52	50
Operating expense	586	477	371
Profit before taxes	421	345	270
Taxes	188	149	108
Net profit after taxes	$233	$196	$162
Dividends	95	84	65
Earnings retained	$138	$112	$97