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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: 8 years ago.
Category: Homework
Expert:  Neo replied 8 years ago.

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