Paladin Furnishings generated $4 million in sales during 2018, andits year-end total assets were $3.2 million. Also, at year-end 2018, 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 2019, the company estimates that its assetsmust increase by $0.80 for every $1.00 increase in sales. Paladin’s profit margin is 3%, andits retention ratio is 50%. How large of a sales increase can the company achieve withouthaving to raise funds externally?
Paladin Furnishings generated $4 million in sales during 2018, andits year-end total assets were $3.2 million. Also, at year-end 2018, 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 2019, the company estimates that its assetsmust increase by $0.80 for every $1.00 increase in sales. Paladin’s profit margin is 3%, andits retention ratio is 50%. How large of a sales increase can the company achieve withouthaving to raise funds externally?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter9: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 4P: Sales Increase Maggies Muffins Bakery generated 5 million in sales during 2018, and its year-end...
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Paladin Furnishings generated $4 million in sales during 2018, and
its year-end total assets were $3.2 million. Also, at year-end 2018, 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 2019, the company estimates that its assets
must increase by $0.80 for every $1.00 increase in sales. Paladin’s profit margin is 3%, and
its retention ratio is 50%. How large of a sales increase can the company achieve without
having to raise funds externally?
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