Getrag Expects Its Sales to Increase 20% Next Year from Its

question 1

Multiple Choice

Getrag expects its sales to increase 20% next year from its current level of $4.7 million. Getrag has current assets of $660,000, net fixed assets of $1.5 million, and current liabilities of $462,000. All assets are expected to grow proportionately with sales. If Getrag has a net profit margin of 10%, what additional financing will be needed to support the increase in sales? Getrag does not pay dividends.

• A) $339,600
• B) $283,200
• C) No financing needed, surplus of $224,400
• D) No financing needed, surplus of $524,400

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Definitions:

Adjusting for Inflation

The process of altering financial figures to account for the change in the purchasing power of money over time.

Pension Plan

A retirement savings plan sponsored by an employer, providing a fixed payout to employees upon retirement.

Multiplier

A factor that quantifies the change in economic activity resulting from a change in spending, used in macroeconomic analysis to estimate the effect of investment, government spending, and other economic activities.

Career Average

Indicates the average achievements, earnings, or performance levels over the span of an individual's career.