Suppose That Gyp Sum Industries Currently Has the Balance Sheet

question 91

Multiple Choice

Suppose that Gyp Sum Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $20 million. The firm also has a profit margin of 22 percent, a retention ratio of 42 percent, and expects sales of $30 million next year. If all assets and current liabilities are expected to grow with sales, how much additional funds will Gyp Sum need from external sources to fund the expected growth?
$$\begin{array} { l r r l r } \text { Assets } & &{ \text { Liabilities ard Equity } } \\\text { Current Assets } & 2,000,000 & \text { Current Liabilities } & \$ 1,500,000 \\\text { Fixed Assets } & 14,000,000 & \text { Long-tem Debt } & 1,500,000 \\& & \text { Equity } & 13,000,000 \\\text { Total Assets } & \$ 16,000,000 & \text { Total Liabilities and Equity } & \$ 16,000,000\end{array}$$

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Definitions:

Standard Deviation

An indicator of the extent of variability or spread within a dataset, showing how significantly the values deviate from the average.

Lead Time

The amount of time that passes from the start of a process until its completion, often used in supply chain and project management.

Safety Stock

Additional inventory held to protect against uncertainties in demand or supply, ensuring product availability.

Shortage Per Cycle

The average amount of inventory deficit that occurs during a specific period due to discrepancies between supply and demand.