Question: Ambex Inc expects sales to increase to 36 million next

Ambex Inc. expects sales to increase to $36 million next year, from $27 million this year. Its current assets are $9 million, accounts payable is $2.7 million, fixed assets are $9 million, long-term debt is $3.6 million, owners' equity is $11 million, and earnings after tax-to-sales ratio is 5 percent. Current assets and accounts payable can be assumed to increase in the same proportion as sales. Other current liabilities are expected to stay at the same level. Net fixed assets will increase by $1 million, and the firm plans to pay $800,000 as dividends.
a. What are Ambex's total financing needs for next year?
b. How much money would Ambex have to borrow to finance its needs?

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  • CreatedMarch 27, 2015
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