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LuckyWell [14K]
3 years ago
8

Problem 4-8 Sales and Growth [LO2] The most recent financial statements for Alexander Co. are shown here: Income Statement Balan

ce Sheet Sales $ 42,950 Current assets $ 17,580 Long-term debt $ 37,070 Costs 35,550 Fixed assets 68,350 Equity 48,860 Taxable income $ 7,400 Total $ 85,930 Total $ 85,930 Taxes (21%) 1,554 Net income $ 5,846 Assets and costs are proportional to sales. The company maintains a constant 35 percent dividend payout ratio and a constant debt-equity ratio. What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued
Business
1 answer:
Flura [38]3 years ago
3 0

Answer:

$3,621.96

Explanation:

ROE = Net income/Equity * 100

ROE = 5846/48860*100

ROE = 11.9648%

Dividend payout ratio = 35%

Retention Ratio = 1 - 35% = 65%

Sustainable growth rate = (ROE*b)/(1-ROE*b)

Sustainable growth rate = (11.9648%*0.65)/(1- (11.9648%*0.65%))

Sustainable growth rate = 8.43%

Therefore, Maximum Dollar Increase in sales = Sales * Sustainable growth rate = 42,950 * 8.43% = $3,621.96

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Mystic Laboratories reported total assets of $11,200,000 and noncurrent assets of $1,480,000. The company also reported a curren
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$6,480,000

Explanation:

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3 0
3 years ago
A company that loans money to an organization is a(n):______.a. supplier.b. lender.c. shareholder.d. investor.
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Answer:

lender.

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6 0
3 years ago
The following is the adjusted trial balance of Wilson Trucking Company.
Troyanec [42]

Answer:

<u>PART 1:</u> Wilson Trucking Company reported Net Income of $15,854  for the year ended December 31, 2017.

<u>PART 2:</u> As per the statement of changes in equity, K. Wilson Capital Account Balance as at December 31, 2017 is $190,124

* Please note that figures in brackets represent negative values.

Explanation:

<u>PART 1</u>    

                                           Wilson Trucking Company

                     Income Statement for the year ended December 31, 2017

<u>Revenue </u>

Trucking Fees                                                         $115,500  

<u>Less Expenses:</u>  

Depreciation expense of Trucks                                  $(26,043)

Salaries expense                                                          $(54,170)

Office supplies expense                                          $(9,500)

Repairs expense -Trucks                                          $(9,933)

 

Net Income                                                                 $15,854  

 

<u>PART 2</u>  

                                        Wilson Trucking Company

     Statement of changes in Equity for the year ended December 31, 2017

K. Wilson Capital Account Balance as at December 31, 2016  $193,270  

Add: Net Income for the year                                                          $15,854  

Less: K. Wilson withdrawals during the year                                  $(19,000)

K. Wilson Capital Account Balance as at December 31, 2017  $190,124  

7 0
3 years ago
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