Bannister Legal Services generated $2.0 million in sales during2007, and its year-end total assets were $1.5 million. Also, atyear-end 2007, current liabilities were $500,000, consisting of$200,000 notes payable, $200,000 of accounts payable, and $100,000of accruals. Looking ahead to 2008, the company estimates that itsassets must increase by 75 cents for every $1 increase in sales.Bannister’s profit margin is 5%, and its payout ratio is 60%. Howlarge a sales increase can the company achieve without having toraise funds externally?
AFN = (A*/So)^S-(L*/So)^S – MS1(1-d)
year end assets (A*) = 1.5 mill
sales (So). 2007 = 2.0 mill
(A*/So) = 1.5 / 2.0 = 0.5 or 50%
Change in sales (^S) = (A*So) * ^S
*** we need to find change in sales
***Actual liabilities do not include notes payable
Actual liabilities/ 2007 Sales (Current not projected)
Liabilities = $200,000 (AP) + $100,000 (Accruals)
Liabilities = $300,000
Sales = 2 million
Formula = (L*/So)
=300,000 / 2,000,000 = .15 or 15%
M = profit margin = 5%
S1 = Sales forecasted unknown
1-d = 1 -dividend = 1 – 60% = 40%
The ANSWER is 68,965.52 but what is the formula to achieve theanswer
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