What is the impact of sales growth on ABC, Inc. borrowing needs?

A) the business has no long-term sales growth and no seasonal sales peak, so there is no borrowing caused by sales growth.

B) the business has high long-term sales growth, which is a potential borrowing cause, but it has no seasonal sales peak.

C) the business has both long-term sales growth and a seasonal sales peak, which reduces its need to borrow.

D) the business has long-term sales growth and a seasonal sales peak, both of which are potential borrowing causes.

ABC, Inc.

Balance Sheet

(in $000s)

As At December 31, 20Y4

ASSETS
Current Assets
Cash	$320
Accounts Receivable	$2,350
Inventory	$1,600
Other current assets	$175
Total current assets	$4,445
Net fixed assets	$7,750
Other assets	$300
TOTAL ASSETS	$12,495
LIABILITIES AND EQUITY
Current liabilities
Current portion-LTD	$691
Short-term bank debt	$2,370
Accounts payable	$1,375
Accrued expenses	$1,114
Other current liabilities	$420
Total current liabilities	$5,970
Long-term debt	$4,660
Owners equity	$1,865
TOTAL LIABILITIES AND EQUITY	$12,495

ABC, Inc.

Income Statements

(in $000s)

Years Ended December 31:

	20Y4	20Y3	20Y2	20Y1
Sales	$15,500	$12,200	$8,288	$9,750
COGS	10,959	8,893	6,212	7,505
Depreciation expense	1,255	1,477	915	1,030
Gross profit	3,286	1,830	1,161	1,215
Operating expenses
General & admin. Expense	575	344	280	250
Selling expense	850	514	421	436
Other expense	49	28	19	20
Total operating expense	1,474	886	720	706
Profit before taxes	1,812	944	441	509
Provision for income taxes	706	396	167	178
Net income	$1,106	$548	$274	$331