Reference no: EM131075885
Quiz Review 2: Ch. 3 & 4
Completeand solve each problem, illustrating how you came to the solution. Partial credit for incorrect answers may be granted if work is illustrated. Each problem is worth up to 25 points.
1. Griffin Inc. is expected to double sales from $500,000 to $1,000,000 next year. Net assets (assets -liabilities) will remain constant at 50% of sales and 9% return on total sales. They have $100,000 in the bank (cash) and seem to have a very optimistic outlook going forward.
a. Compute the cash balance (or deficit) for the end of the year (beginning cash less asset buildup) and add in profit.
b. Can you confirm their optimism?
2. Copper Cable Company boasts sales of 3,000 units at $50 per spool of cable last year. Marketing projects a 20% increase in unit volume sales this year with a 10% price increase.
- What would the total sales projected for next year look like?
- If 3% of merchandise is returned, what is the revised net sales projection?
3. In a minimum of 75 words, explain why financial managers need to understand the implications of the sustainable rate of growth.
4. Use the information from Boss's annual financial statements below to answer the questions that follow.
a. What is the actual sales growth rate for 2010?
b. What is the sustainable sales growth rate for 2010?
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