Question

Projected Operating Assets

Berman & Jaccor Corporation's current sales and partial balance sheet are shown below.

	This year
Sales		$	1,000
Balance Sheet: Assets
Cash		$	200
Short-term investments		$	115
Accounts receivable		$	200
Inventories		$	250
Total current assets		$	765
Net fixed assets		$	550
Total assets		$	1,315

Sales are expected to grow by 12% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? Do not round intermediate calculations. Round your answer to the nearest dollar.

Answer 1

Answer :

Operating assets are cash, accounts receivable, inventories and net fixed assets,first we calculate ratio of each operating assets of last year to last year's sales.

Cash = (cash/sales) = $200/$1,000 = 0.20

Accounts receivable = $200/$1,000 = 0.20

Inventories = $250/$1,000 = 0.25

Net fixed assets = $550/$1,000 = 0.55

Next year's sales = current sales*(1+growth rate) = $1,000*1.12 = $1,120

Project cash next year = project sales*cash to sales ratio = $1,120*0.20 = $224

Project accounts receivable = $1,120*0.20 = $224

Projected inventories = $1,120*0.25 = $280

Projected Net fixed assets = $1,120*0.55 = $616

projected total operating assets = $224 + $224 + $280 + $616 = $1344