Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
M and H Corporation is evaluating its financing requirements for the coming year
M and H Corporation is evaluating its financing requirements for the coming year. The firm has only been in business for 1 year, but its CFO predicts that the firm's operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year M and H Corp. had $15 million in sales with net income of $1.5 million. The firm anticipates that next year's sales will reach $18 million with net income rising to $3 million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments.
The firm's balance sheet for the year just ended is found below:
| M and H Corporation Balance Sheet 12/31/2000 | ||
|---|---|---|
| % of Sales | ||
| Current assets | $6,000,000 | 40 % |
| Net fixed assets | 9,000,000 | 60 % |
| Total | $15,000,000 | |
| Liabilities and Owner's Equity | ||
| Accounts payable | $3,750,000 | 25 % |
| Long-term debt | 4,250,000 | NA |
| Total liabilites | $8,000,000 | |
| Common stock | 2,000,000 | NA |
| Paid-in capital | 2,800,000 | NA |
| Retained Earnings | 2,200,000 | |
| Common Equity | 7,000,000 | |
| Total | $15,000,000 | |
Estimate M and H Corp., total financing requirement (i.e., total assets) for 2001 and its net funding requirements (DFN).
Expert Solution
| Particulars | Year 1 | Year 2 | |
| Assets | |||
| Current Assets | 6,000,000 | +0.40 of sales | 7,200,000 |
| Net Fixed Assets | 9,000,000 | +0.60 of sales | 10,800,000 |
| Total assets | 15,000,000 | 18,000,000 | |
| Liabilities and Owners equity | |||
| Accounts payable | 3,750,000 | +0.25 of sales | 4,500,000 |
| Long term debts | 4,250,000 | 4,250,000 | |
| Total debts | 8,000,000 | 8,750,000 | |
| Common stock | 2,000,000 | 2,000,000 | |
| Paid in capital | 2,800,000 | 2,800,000 | |
| Retained earnings | 2,200,000 | Increase in Net income which is all retained | 5,200,000 |
| 15,000,000 | 18,750,000 | ||
| DFN | -750,000 |
The firm will have surplus funds to the extent of $750,000. Hence, no funding is required.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
