ICU Has Current Assets of $800,000 and Net Fixed Assets

question 65

Multiple Choice

ICU has current assets of $800,000 and net fixed assets of $1,400,000. The firm expects its sales to climb 25 percent next year from its current level of $3,500,000. ICU's only current liability is accounts payable of $1,200,000. If both current assets and current liabilities will increase proportionately with sales, what additional financing will be needed by ICU next year? Assume ICU has a net profit margin of 6 percent. An increase in net fixed assets of $500,000 will be required. The firm pays out 50 percent of its earnings as dividends.

• A) $400,000
• B) $358,750
• C) $178,750
• D) $268,750

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Definitions:

New Business Location

The process or act of establishing a company's operations in a different geographical area, often to expand market reach or access new opportunities.

Land

Land refers to a parcel or tract of ground, including any natural resources over or under it, owned or used by a person or organization.

Existing Building

A structure that has been previously erected and is used or suitable for use in a particular function or occupancy.

Ready Land

Land that has been developed or prepared for construction or agricultural use, often including improvements like utility connections or cleared terrain.