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Recommended Financing. Frost Corporation has shown growth in sales and earnings but has a liquidity problem. The rate of inflation is high. At year-end 20X8, the company requires $500,000 for the following reasons:
New machinery
$200,000
Research and development
80,000
Paying overdue obligations
130,000
Paying accrued expenses
25,000
Desired increase in cash balance
65,000
$500,000
Partial financial statements for 20X8 are shown below.
Frost Corporation
Balance Sheet
December 31, 20X8
ASSETS
Current assets
Cash
$10,000
Other current assets
320,000
Total current assets
$330,000
Noncurrent assets
570,000
Total assets
$900,000
LIABILITIES AND
STOCKHOLDERS' EQUITTY
Current liabilities
Long-term debt
100,000
Total liabilities
$600,000
Stockholders' equity
Common stock
$250,000
Retained earnings
50,000
Total stockholders' equity
300,000
Total liabilities and stockholders'
Equity
Income Statement
For the year Ended December 31, 20X8
Sales
$1,300,000
Cost of sales
600,000
Gross margin
$ 700,000
Operating expenses
500,000
Income before tax
$ 200,000
Tax
86,000
Net income
$ 114,000
The company expects that sales and earnings will increase by 25 percent and 20 percent, respectively. What type of financing is recommended?
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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