Star Supermarket Ltd. is evaluating its financial requirements for the year 2019. The companys CFO expects that
Question:
Star Supermarket Ltd. is evaluating its financial requirements for the year 2019. The company’s CFO expects that the relationship between firm sales and its operating expenses, current assets, its assets, and current liabilities will remain at their current proportion of sales.
In 2018, Star had \($3\) million in sales and net income of \($0.5\) million. According to Star’s evaluation of the market and latest developments in the company’s successful sales strategy, it anticipates that next year’s sales will reach \($4\) million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments.
The firm’s balance sheet for 2018 is shown in the following table:
Using the information provided above make an estimate of Star’s financing requirements or total assets for 2019 and its discretionary financing needs (DFN).
Step by Step Answer:
Foundations Of Finance
ISBN: 9781292318738
10th Global Edition
Authors: Arthur Keown, John Martin, J. Petty