Symbolic Logic Corporation (SLC) is a technological leader in the application of surface mount technology in the manufacture of printed circuit boards used in the personal computer industry. The firm has recently patented an advanced version of its original path-breaking technology and expects sales to grow from their present level of $5 million to $8 million by the end of the coming year. Since the firm is at present operating at full capacity, it expects to have to increase its investment in both current and fixed assets in proportion to the predicted increase in sales.

The firms net profits were 7% of current years sales but are expected to rise to 8% of next years sales. To help support its anticipated growth in asset needs next year, the firm has suspended plans to pay cash dividends to its stockholders. In years past, a $1.25 per share dividend has been paid annually.

Symbolic Logic Corporation ($ millions)
	Present Level	Percent of Sales	Projected Level
Current assets	$2.5
Net fixed assets	3.0
Total	$5.5
Accounts payable	$1.0
Accrued expenses	0.5
Notes payable	0.5
Current liabilities	$1.5
Long-term debt	$2.0
Common stock	0.5
Retained earnings	1.5
Common equity	$2.0
Total	$5.5

SLCs payables and accrued expenses are expected to vary directly with sales. In addition, notes payable will be used to supply the funds needed to finance next years operations and that are not forthcoming from other sources.

a. Fill in the table and project the firms needs for discretionary financing. Use notes payable as the balancing entry for any future discretionary financing needed.

b. Compare SLCs current ratio and debt ratio (total liabilities/total assets) before the growth in sales and after. What was the effect of the expanded sales on these two dimensions of SLCs financial condition?

c. What difference, if any, would have resulted if SLCs sales had risen to $6 million in one year and $8 million after only two years? Discuss only; no calculations are required.