Explain how increasing the retention ratio

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Reference no: EM131852179

LONG-TERM FINANCING NEEDED At year-end 2015, total assets for Ambrose Inc. were $1 2 million and accounts payable were $375,000. Sales, which in 2015 were $2 5 million, are expected to increase by 25% in 2016. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Ambrose typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2015, and retained earnings were $295,000. Ambrose plans to sell new common stock in the amount of $75,000. The firm’s profit margin on sales is 6%; 60% of earnings will be retained.

Explain how Increasing the Retention Ratio, Decreasing the Accounts Receivables, Increasing the Accounts Payable and Increasing the Common Stock Issue will reduce the Forecasted Debt Finance for Ambrose Inc. (A PARAGRAPH FOR EACH SECTION)

Reference no: EM131852179

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