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What should the level of sales

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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?

Reference no: EM132946483

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