LLV Inc Originally Forecasted the Following Financial Data for Next Year

question 8

Multiple Choice

LLV Inc. originally forecasted the following financial data for next year: sales = $1,000, cost of goods sold = $710, and interest expense = $95. The firm believes that COGS will always be 71 percent of sales. Due to pressure from shareholders, the firm wants to achieve a net income of $150. Assuming the interest expense will remain the same, how large must sales be to achieve this goal? Assume a 35 percent tax rate.

• A) $1,403.82
• B) $1,3009.18
• C) $1,123.34
• D) $1,296.51

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Definitions:

Closing Inventories

The total value of goods available for sale at the end of an accounting period, recorded on the balance sheet.

Non-Controlling Interests

The portion of equity in a subsidiary not attributable directly or indirectly to the parent company, sometimes referred to as minority interest.

Retained Earnings

Profits that a company retains for reinvestment in its operations, rather than distributing to shareholders as dividends.

Reporting Period

A specified duration of time for which an organization prepares its financial statements and reports to present its financial performance and position.