1. Do you agree with Mr. Butler's estimate that he will need up to $465,000 in 1991?...
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Question:
1. Do you agree with Mr. Butler's estimate that he will need up to $465,000 in 1991? How much will he need to borrow to finance his expected expansion in sales in 1991 (assume sales volume hits $3.6 million)? As part of your analysis, construct annual pro forma income statements and balance sheets for 1991 and make the following assumptions:
- The tax rate is a flat 17%;
- 1991 interest expense is based on bank debt of $465,000;
- Bank debt is used to repay any trade notes payable;
- Discounts (if any) are recorded as a separate line item on the income statement.
2. How much will Mr. Butler need if sales continue to grow at 25% per year for the next three years? Which assumptions in your analysis are the most important for your conclusion?
3. What changes (if any) would you advise that Mr. Butler make to his business plan?
Related Book For
Ethical Obligations and Decision Making in Accounting Text and Cases
ISBN: 978-0077862213
3rd edition
Authors: Steven Mintz, Roselyn Morris
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