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Marvin industries Inc. operates as a diversified software company worldwide. Its Digital Media segment provides tools and solutions that enable individuals, teams, and organizations to create, publish, promote, and monetize their digital content. The company is forecasting operations to determine the additional financing that will be needed to support its operations and to assess whether the firm’s anticipated performance is in line with the company’s own general targets and investors’ expectation.

Marvin Industries: balance sheet as of December 31, 2020 (Thousands of dollars)

Cash

2,000

Accounts Payable

7,200

Receivables

10,800

Notes Payable

3,400

Inventories

12,400

Accruals   

2,620

Total current assets

25,200

Total current liabilities

13,220

 

 

Long-term debt

?

Fixed assets

21,600

Common stock

2,000

 

 

Retained earnings   

26,580

Total assets

46,800

Total liabilities & equity    

46,800

Marvin Industries: Income Statement for December 31, 2020 (Thousands of dollars)

Sales

36,000

Operating costs

30,000

EBIT

5,400

Interest

720

Taxes @ 25%

1,170

Net income

3,510

Dividends 60%

2,016

Addition to retained earnings

1,404

Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Marvin has arranged to sell $5,000 of new common stock in 2021 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2021. The company’s net profit margin on sales is 9.75%, and 60% of earnings will be paid out as dividends. Marvin is operating at full capacity, so its assets must grow at the same rate as projected sales.

a. What were Marvin’s long-term debt and total liabilities for 2020?

b. Sales are projected to increase by 25% over the 2020 sales figure. De