Question

EMM, Inc. has the following balance sheet:
a. If the firm expects sales to rise from $20,000 to $25,000, what are the forecasted levels of accounts receivable, accounts payable, and inventory?
b. Will the expansion in accounts payable cover the expansion in inventory and accounts receivable?
c. If the firm earns 12 percent on sales after taxes and retains all of these earnings, will it cover its estimated needs for short-term financing?
d. Construct a new balance sheet that incorporates the issuing of additional short-term debt to cover any needs for additional finance.
Assume cash remains $1,000. If cash also increases proportionately with sales, what impact will the increase in cash have on the firm’s need for funds?


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  • CreatedMarch 19, 2015
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