South County Fiberoptics Projects That It Will Need $100 Million

question 71

Multiple Choice

South County Fiberoptics projects that it will need $100 million in total assets to meet the sales projection of $130 million. The pro forma balance sheet shows accounts payable, $16 million, accrued expenses, $4 million, long-term debt, $20 million and equity, $65 million. If South County decides to meet discretionary financing needs with 5 year notes payable, how much will it need to borrow?

• A) $20 million
• B) $0, the firm has excess funds.
• C) $10 million
• D) Cannot be calculated without knowing the net profit margin.

---

Definitions:

Fixed Cost

Expenses that do not change with the level of production or sales in the short term, such as rent, salaries, and insurance premiums.

Gross Profit

Money available to cover the costs of marketing the product, operating the business, and profit.

Merchandise

Goods or products that are purchased, sold, or traded, often in the context of retail.

Emotional Intelligence

The combination of four abilities: (a) your ability to perceive other’s emotions; (b) your ability to identify your emotions, (c) your ability to understand what’s causing your emotion, and (d) your ability to manage your emotions.