Reference no: EM132946483
Hillary Incorporation provided the following information for the year ended December 31, 2019:
Total assets $9,600,000
Total inventory $375,000
Total debt (borrowed at 25%) $6,000,000
Depreciation and Amortization -0-
Total assets turnover 1.25x
Other cash operating expenses $4,500,000
Tax rate 40%
Inventory turnover ratio 8x
DSO 40 days
Martin Hillary, the company's CFO, wants to see a 25 percent increase in net income for the year 2020, and made the following observations:
- The company's operating profit margin is expected to be 40% for the year 2020.
- No changes in the total interest, depreciation and amortization, and the tax rate are expected for the year 2020.
Instructions:
Problem a. Prepare the income statement for the year 2019.
Problem b. What should the level of sales in 2020 be so that the target net income will be met?