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Planning for Growth at S&S Air After Chris comple...




Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air, Mark and Todd approached him about planning for next year's sales. The company had historically used little planning for investment needs. As a result, the company experienced some challenging times because of cash flow problems. The lack of planning resulted in missed sales, as well as periods when Mark and Todd were unable to draw salaries. To this end, they would like Chris to prepare a financial plan for the next year so the company can begin to address any outside investment requirements. The income statement and balance sheet are shown here: S&S Air, Inc. 2006 Income Statement Sales $ 21,785,300 Cost of goods sold 15,874,700 Other expenses 2,762,500 Depreciation 976,200 EBIT $ 2,171,900 Interest 341,600 Taxable income $ 1,830,300 Taxes (40%) 732,120 Net income $ 1,098,180 Dividends $439,272 Add to retained earnings 658,908 S&S Air, Inc. 2006 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 315,000 Accounts payable $ 635,000 Accounts receivable 506,000 Notes payable 1,450,000 Inventory 740,800 Total current liabilities $ 2,085,000 Total current assets $ 1,561,800 Long-term debt $ 3,800,000 Fixed assets Net plant and equipment $ 11,516,000 Shareholder equity Common stock $ 250,000 Retained earnings 6,942,800 Total equity $ 7,192,800 Total assets $ 13,077,800 Total liabilities and equity $13,077,800 QUESTION: Calculate the internal growth rate adn sustainable growth rate for S&S Air. What do these numbers mean?


Paper#3901 | Written in 18-Jul-2015

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