AL DELTA Investment company is operating business in a dynamic and competitive market of the Far East.
Question:
AL DELTA Investment company is operating business in a dynamic and competitive market of the Far East. To cope with the dynamic variables of the demand and supply markets, the management of the company is quite conscious about the expected change in NWC, total assets and their implications on total liabilities of the company. Information on the current financial year (2019) and the budgeted data for the year 2020 could be summarized as follows:
- Expected rate of growth of current assets 14%
- Expected positive change in fixed assets 15%
- Expected growth rate of NWC 17%
- The total assets (year 2019) $ 28000000
The relationship between current assets and fixed assets is depicted around the ration 3:2 respectively. Current liabilities amounted to $7000000 in year 2019. The company is planning to issue new shares in year 2020, provide that the amount should not exceed 16% of the equity in year 2019. ROTA is projected to be 9% in the coming year and the DPR is 44%. The depreciation rate will remain the same (10%) under the SLM. FA equals equity in year 2019.
Required:
- As a consultant, find out the implications of change on liabilities in year 2020 and find out the total liabilities of the company
- Give a concise comparison between êD and SI
Financial Institutions, Markets and Money
ISBN: 978-1119330363
12th edition
Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias