Paladin Furnishings generated $2 million in sales during 2016, and its year end total assets were $1 5 million Also, at year end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities Looking ahead to 2017, the company estimates that its assets must increase by $0 75 for every $1 00 increase in sales Paladin's profit margin is 6 , and its retention ratio is 50 The data has been collected in the Microsoft Excel Online file below Open the spreadsheet and perform the required analysis to answer the question below Open spreadsheet Sales increase Sales (S0) $2,000,000 Rate of asset growth 75 00 Total assets A 0 $1,500,000 Profit margin 6 00 Retention ratio 50 00 Current liabilities L 0 $500,000 Notes payable $200,000 Accounts payable $200,000 Accrued liabilities $100,000 Projected increase in assets (S1 S0) Spontaneous increase in liabilities (S1 S0) Increase in retained earnings S1 Next Year's Sales (S1) Increase in Sales How large of a sales increase can the company achieve without having to raise funds externally Write out your answer completely For example, 25 million should be entered as 25,000,000 Do not round intermediate calculations Round your answer to the nearest cent

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 07, 2024

Paladin Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.5 million. Also, at year-end 2016, current liabilities were $500,000,

Paladin Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.5 million. Also, at year-end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.75 for every $1.00 increase in sales. Paladin's profit margin is 6%, and its retention ratio is 50%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

Open spreadsheet

Sales increase

Sales (S0)	$2,000,000
Rate of asset growth	75.00%
Total assets A*0	$1,500,000
Profit margin	6.00%
Retention ratio	50.00%
Current liabilities L*0	$500,000
Notes payable	$200,000
Accounts payable	$200,000
Accrued liabilities	$100,000


Projected increase in assets		(S1 - S0)
Spontaneous increase in liabilities		(S1 - S0)
Increase in retained earnings		S1

Next Year's Sales (S1) =
Increase in Sales =

How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.