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Problem 11

The document discusses using the percent of sales method to calculate the new funds needed to finance growth for a company called Sonny's Electronics. It provides the formulas and calculates that the new funds needed are $1,380,000.

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Lynssej Barbon
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24 views1 page

Problem 11

The document discusses using the percent of sales method to calculate the new funds needed to finance growth for a company called Sonny's Electronics. It provides the formulas and calculates that the new funds needed are $1,380,000.

Uploaded by

Lynssej Barbon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Problem 11 (Percent of Sales Method )

Solutions :
Sonny's Electronic at full Capacity
Where :
Spontaneous Assets =Current Assets plus Fixed Assets
Spontaneous Liabilities =Accounts payable +Accrued wages +Accrued taxes

RNF Formula = Assets /Sales (increase in Sales) minus liabilities /Sales (increase in sales) minus
Addition to Retained Earning

Increase in Sales = 10 % (100 million)


=10 million

Addition to retained Earning =.70 (110 million )(1-.40)


=.70(110 million ) (.60)
= 4, 620, 000

RNF (In million ) =85 /100 (10 million ) - 25/100 (10 million) - (4, 620, 000)
=.85 (10 million ) - .25(10 million ) - 4, 620, 000
= 8, 500, 000 - 2, 500, 000 - 4, 620, 000
= 1, 380, 000
So that the new funds are needed to finance the growth is P 1, 380, 000.

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