Pierce Furnishings generated $2 million in sales during 2011, and its year-end t
ID: 2704550 • Letter: P
Question
Pierce Furnishings generated $2 million in sales during 2011, and its year-end total assets were $1.1 million. Also, at year-end 2011, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2012, the company estimates that its assets must increase by $0.55 for every $1.00 increase in sales. Pierce's profit margin is 3%, and its retention ratio is 45%. How large of a sales increase can the company achieve without having to raise funds externally? Round your answer to the nearest cent.
$
Explanation / Answer
Given
S2011 = $2,000,000
A2011 = $1,100,000
CL2011 = $500,000
NP2011 = $200,000
A/P2011 = $200,000
Accrued liabilities2011 = $100,000
A*/S0 = 0.55
PM = 3%
RR = 45%
AFN= (A*/S0)?S