The management of Yates Motors is considering investing $950,000 to purchase a Hyundai dealership and expand...

Transcribed Image Text:

The management of Yates Motors is considering investing $950,000 to purchase a Hyundai dealership and expand operations in Barrie. Last year's financial figures are as follows: Revenues Total Expenses Net income 1,850,000 1,550,000 300,000 Prior Year - Financials Assets Current assets Cash 40,000 Accounts Receivable 90,000 Inventory 400,000 Total current assets 530,000 Next year the company expects sales to increase by 80% due to the expansion. The return on sales is expected to fall to 11.5% due to the initial set up costs. Management also expects there to be changes in the working capital accounts on the balance sheet. Due to increased sales with the new dealership, average accounts receivable is expected to increase to $160,000-a total increase of $70,000 on last year. Again due to the expansion, Yates' expects to take on more inventory next year. They expect it to increase by $125,000 to $525,000. Long term Assets Building equipment TOTAL ASSETS Liabilities and Equity Current liabilities 800,000 310,000 1,640,000 Accounts Payable Working Capital Loan 100,000 135,000 Total Current liabilities 235,000 Long term debts TOTAL DEBTS 645,000 880,000 Questionc Shareholders Equity. Common Shares 360,000 Retained earnings 400,000 TOTAL SHAREHOLDERS 760,000 EQUITY TOTAL SHAREHOLDERS 1,640,000 EQUITY and LIABILITIES The management of Yates Motors is considering investing $950,000 to purchase a Hyundai dealership and expand operations in Barrie. Last year's financial figures are as follows: Revenues Total Expenses Net income 1,850,000 1,550,000 300,000 Prior Year - Financials Assets Current assets Cash 40,000 Accounts Receivable 90,000 Inventory 400,000 Total current assets 530,000 Next year the company expects sales to increase by 80% due to the expansion. The return on sales is expected to fall to 11.5% due to the initial set up costs. Management also expects there to be changes in the working capital accounts on the balance sheet. Due to increased sales with the new dealership, average accounts receivable is expected to increase to $160,000-a total increase of $70,000 on last year. Again due to the expansion, Yates' expects to take on more inventory next year. They expect it to increase by $125,000 to $525,000. Long term Assets Building equipment TOTAL ASSETS Liabilities and Equity Current liabilities 800,000 310,000 1,640,000 Accounts Payable Working Capital Loan 100,000 135,000 Total Current liabilities 235,000 Long term debts TOTAL DEBTS 645,000 880,000 Questionc Shareholders Equity. Common Shares 360,000 Retained earnings 400,000 TOTAL SHAREHOLDERS 760,000 EQUITY TOTAL SHAREHOLDERS 1,640,000 EQUITY and LIABILITIES