Jones Company Sales Last Year Were $25 Million and Its

question 33

Multiple Choice

Jones Company sales last year were $25 million and its total assets were $8 million. Accounts payable were $2 million and common stock and retained earnings were $5 million. Jones sales are forecasted to be $30 million this year, earnings after tax are expected to be 3% of sales, and dividends of $250,000 are expected to be paid. Assuming that the ratio of assets to sales and current liabilities to sales remain the same this year as last year, determine the amount of additional financing required.

• A) $550,000
• B) $1,200,000
• C) $300,000
• D) None of the above

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Definitions:

Income

Represents the money received, especially on a regular basis, for work or through investments.

Price of X

The amount of money required to purchase a specified amount of good or service 'X'.

Price of Y

The cost or value attributed to a good or service denoted by 'Y', often set by market demand and supply or by the seller.

Utility Function

A mathematical representation that ranks preferences or satisfaction levels of a consumer for different bundles of goods.