Calculate both SGR and IGR for both of your assigned companies (Olympic and Johnson). Then create a
Question:
Calculate both SGR and IGR for both of your assigned companies (Olympic and Johnson). Then create a proforma income statement and Balance sheet for your Olympic company only - by growing the company sales using the respective SGR only. Comment on the following issues:
• Will retain earnings be enough for the desired growth? If not, then consider a loan.
• If the loan taken, then check whether the loan will be sustainable or not
• Can the company achieve the growth without taking a loan by changing dividend policy?
Keep the following points in mind in calculation:
• Use FY 2020 info as current year (31/12/20).
• Increase depreciation.
• Interest expense will not change.
• The current D/E is optimum.
• All assets will grow.
• Among liabilities, only accounts payable will grow.
• Equity will not change.
Expert Answer:
ANSWER supported with no external financing by only relying on retained earnings as funding The IGR ... View the full answer
