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Bannister Legal Services generated \$2.0 million in sales during

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Bannister Legal Services generated \$2.0 million in sales during 2007, and its year-end total assets were \$1.5 million. Also, at year-end 2007, current liabilities were \$500,000, consisting of \$200,000 notes payable, \$200,000 of accounts payable, and \$100,000 of accruals. Looking ahead to 2008, the company estimates that its assets must increase by 75 cents for every \$1 increase in sales. Bannister's profit margin is 5%, and its payout ratio is 60%. How large a sales increase can the company achieve without having to raise funds externally?

AFN = (A*/So)^S-(L*/So)^S - MS1(1-d)

year end assets (A*) = 1.5 mill
sales (So). 2007 = 2.0 mill
(A*/So) = 1.5 / 2.0 = 0.5 or 50%

Change in sales (^S) = (A*So) * ^S
*** we need to find change in sales

***Actual liabilities do not include notes payable
Actual liabilities/ 2007 Sales (Current not projected)
Liabilities = \$200,000 (AP) + \$100,000 (Accruals)
Liabilities = \$300,000
Sales = 2 million
Formula = (L*/So)
=300,000 / 2,000,000 = .15 or 15%

M = profit margin = 5%

S1 = Sales forecasted unknown

1-d = 1 -dividend = 1 - 60% = 40%
The ANSWER is 68,965.52 but what is the formula to achieve the answer
Submitted: 7 years ago.
Category: Homework
Expert:  Neo replied 7 years ago.

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Neo, Tutor
Category: Homework
Satisfied Customers: 12101
Experience: BS Accounting
Customer: replied 7 years ago.

Nice work,

Thank you for answering one of the estimated 60 equations I will perform in Excel or by analyzing financial ststements. I appreciate your service.

Customer: replied 7 years ago.

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Expert:  Neo replied 7 years ago.
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If you wish to request me next time, please type "For Neo" at the beginning of your every new questions.

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