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The Raattama Corporation had sales of $3.5 million last year, and it earned a 5 percent return, after taxes, on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of purchase are net 30 days, its accounts payable represent 60 days" purchases. The company"s treasurer is seeking to increase bank borrowings in order to become current in meeting its trade obligations (that is, to have 30 days" payables outstanding). The company"s balance sheet is as follows (thousands of dollars):
Cash
$ 100
Accounts payable
$ 600
Accounts receivable
300
Bank loans
700
Inventory
1,400
Accruals
. 200
Current assets
$1,800
Current liabilities
$1,500
Land and buildings
600
Mortgage on real estate
Equipment
Common stock, $0.10 par
Retained earnings
500
Total assets
$3,000
Total liabilities and equity
a. How much bank financing is needed to eliminate the past-due accounts payable?
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for more information on format and other requirements please read the relevant section in the course descriptionjason
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