a. Short-term financing means business financing from short-term sources, which are for less than one year....

 

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a. Short-term financing means business financing from short-term sources, which are for less than one year. The same helps the company generate cash for working of the business and for operating expenses, which is usually for a smaller amount. It involves developing money by online loans, lines of credit, and invoice financing. The following information are given for SAS Inc: Sales is M1000 Million, Operating Income is 10% of Sales, Interest expense is expected to be RM10 Million, (ignore additional interest expense generated by additional borrowings in Year 9). Income Tax paid at 40% on operating income, Dividend pay-out ratio is 20% and company needs to increase in working capital and fixed assets at 5% and 10% of total Sales accordingly. Required: Calculate the amount of short-term external finance needs to borrow in next year by SAS Inc.? a. Short-term financing means business financing from short-term sources, which are for less than one year. The same helps the company generate cash for working of the business and for operating expenses, which is usually for a smaller amount. It involves developing money by online loans, lines of credit, and invoice financing. The following information are given for SAS Inc: Sales is M1000 Million, Operating Income is 10% of Sales, Interest expense is expected to be RM10 Million, (ignore additional interest expense generated by additional borrowings in Year 9). Income Tax paid at 40% on operating income, Dividend pay-out ratio is 20% and company needs to increase in working capital and fixed assets at 5% and 10% of total Sales accordingly. Required: Calculate the amount of short-term external finance needs to borrow in next year by SAS Inc.?

Answer rating: 100% (QA)

OPERATING INCOME101000100Million Interest expense10 Million Before tax income1001090 m... View the full answer