question 4 
4. Jayne's second initiative calls for ABCO to obtain a bank loan of a sufficient size to enable the company to take all suppliers' discounts. What is the minimum size of this loan? What should Jayne be considering based on current state of affairs? (Hint: To take all suppliers' discounts, the average payment period must be 10 days, and net purchases will be purchases (Purchases from Figure 1 x .02)). Appendix Figure 1 ABCO FOODS, INC Income Statement, 2019 Revenue from sales Gross sales (credit).. $1,179,000 Cost of goods sold: Beginning inventory. Purchases... $ 141,000 $969,000 Less: Cash discounts.. Net purchases.. Goods available for sale. Less: Ending inventory Cost of goods sold.. Gross profit Selling and administrative expenses Earnings before interest and tax. Interest expense. 969,000 1,110,000 79,557 1.030,443 148,557 73,000 75,557 Earnings before tax Income taxes @ 33% 75,557 24,934 50,623 Net income ABCO FOODS, INC Balance Sheet As of December 31, 2019 Assets: $ 3,560 Cash. Accounts receivable. Inventory.. Total current assets 209,686 79,557 $292,803 Property, plant and equipment, net Total assets 11,430 $304,233 Liabilities and equity: Accounts payable... Notes payable (bank loans) $180,633 $180,633 Total current liabilities Long-term debt Total liabilities. 180,633 Common stock. 13,600 Additional paid-in capital Retained earnings. Total equity. Total liabilities and equity . 83,000 27,000 123.600 $304,233 Selected ratios Profit Margin. Return on equity. Inventory turnover 4.29% 40.96% 14.82 Receivables turnover 5.62 67 Average payment period.. 4. Jayne's second initiative calls for ABCO to obtain a bank loan of a sufficient size to enable the company to take all suppliers' discounts. What is the minimum size of this loan? What should Jayne be considering based on current state of affairs? (Hint: To take all suppliers' discounts, the average payment period must be 10 days, and net purchases will be purchases (Purchases from Figure 1 x .02)). Appendix Figure 1 ABCO FOODS, INC Income Statement, 2019 Revenue from sales Gross sales (credit).. $1,179,000 Cost of goods sold: Beginning inventory. Purchases... $ 141,000 $969,000 Less: Cash discounts.. Net purchases.. Goods available for sale. Less: Ending inventory Cost of goods sold.. Gross profit Selling and administrative expenses Earnings before interest and tax. Interest expense. 969,000 1,110,000 79,557 1.030,443 148,557 73,000 75,557 Earnings before tax Income taxes @ 33% 75,557 24,934 50,623 Net income ABCO FOODS, INC Balance Sheet As of December 31, 2019 Assets: $ 3,560 Cash. Accounts receivable. Inventory.. Total current assets 209,686 79,557 $292,803 Property, plant and equipment, net Total assets 11,430 $304,233 Liabilities and equity: Accounts payable... Notes payable (bank loans) $180,633 $180,633 Total current liabilities Long-term debt Total liabilities. 180,633 Common stock. 13,600 Additional paid-in capital Retained earnings. Total equity. Total liabilities and equity . 83,000 27,000 123.600 $304,233 Selected ratios Profit Margin. Return on equity. Inventory turnover 4.29% 40.96% 14.82 Receivables turnover 5.62 67 Average payment period
