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2. The company has been using cash reserves and constant borrowing of money to cover its liabilities. The reason Mr. Butler is continuing to
have to borrow so much money is that when he bought out Mr. Starks’s interest in the company he became in debt which caused him to have to take
out a loan to repay the amount he owed to Mr. Stark and therefore increased his amount of debt. Mr. Butler has not been managing his company’s
cash flow wisely. He is consistently having to having to use cash reserves to pay back liabilities and he is offering too much credit to his customers
which is increasing his accounts receivable.
Cash 54.00
Accounts Receivable, net 394.00
Inventory 549.00
Total Current Assets 997.00
Propert, net 242.00
TOTAL ASSETS 1,239.00
4. Proforma Income Statements for 2011-2013 with an averade increase in annual sales of 25%
% of sales 2011 2012 2013
Cash 41.00 0.015 51 64 80
Accounts Receivable, net 317.00 0.118 396 495 619
Inventory 418.00 0.155 523 653 816
Total Current Assets 776.00 970 1,213 1,516
Propert, net 157.00 0.058 196 245 307
TOTAL ASSETS 933.00 1,166 1,458 1,822