Evaluate the max amount of additional financing

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Reference no: EM1313076

Calculation of Maximum amount of additional finance that can be borrowed.

BPC anticipates reaching a sales level of $6 million in one year. The company expects a net income during the next year to equal $400,000. Over the past several years, the company has been paying 50k in dividends to its stockholders. The company expects to continue this policy for at least the next year. The actual balance sheet and income statement for BPC are as follows:

BPC Balance sheet as of December 31, 2005

Cash	200,000	Accounts Payable	600,000
Accounts receivable	400,000	Notes Payable	500,000
Inventories	1,200,000	Current liabilities	1,100,000
Current assets	1,800,000	Long-term debt	200,000
Net fixed assets	500,000	Stockholder's equity	1,000,000
Total assets	2,300,000	Total Liabilities and equity	2,300,000

If BPC's banker requires the company to maintain a current ratio equal to 1.6 or greater, what is the max amount of additional financing that can be in the form of bank borrowings (notes payable)? What other potential sources of financing are available to the company?

Reference no: EM1313076

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