Question
The Onion had $10 million of sales this year, which are expected to grow by 20% next year. The projected profit margin is 8% and
The Onion had $10 million of sales this year, which are expected to grow by 20% next year. The projected profit margin is 8% and its retention ratio is 30%. The balance sheet at the end of this year is as follows (in $ million):
Assets | Liabilities and Equity | |||
Cash & equivalents | 3.4 | Accounts payable | 2.9 | |
Accounts receivable | 2.8 | Accrued wages | 1.5 | |
Inventory | 1.2 | Notes payable | 3.2 | |
Current assets | 7.4 | Current liabilities | 7.6 | |
Equipment | 18.2 | Long-term debt | 5.5 | |
Real estate | 14.3 | Total liabilities | 13.1 | |
Fixed assets | 32.5 | Equity | 26.8 | |
Total assets | 39.9 | Total liab. & equity | 39.9 |
Assume that all assets are operating at full capacity, except that fixed assets operate at 95% of capacity.
What is the expected change in sales for next year (in $ million)?
Sales are expected to grow by 20% next year: S1 = S0 * (1+g) = 10 * 1.2 = 12
Change in sales = S = S1 - S0 = 12 - 10 = 2 (million)
1. What is the projected increase in assets for next year (in $ million)?
2. What is the projected increase in liabilities for next year (in $ million)?
3. What is the projected increase in retained earnings for next year (in $ million)?
4. What is the required new funds (RNF) for next year (in $ million)?
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