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

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 $ 150
Short-term investments $ 115
Accounts receivable $ 150
Inventories $ 250
    Total current assets $ 665
Net fixed assets $ 600
    Total assets $ 1,265

Sales are expected to grow by 14% 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.

$  

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Expert Solution

Operating assets are cash, accounts receivable, inventories and net fixed assets.

Total Operating assets =$(150+150+250+600) =$1,150

There are 2 ways to calculate the projected total operating assets.

1.Projected total operating assets

=(100%+ Increase in sales%)*(Operating assets)

=(100% +14%)* 1,150

=$1,311

2. First we calculate ratio of each operating assets of last year to last year's sales.

Operating asset Ratio = Operating asset/ sales

Cash = $150/$1,000 = 0.15

Accounts receivable = $150/$1,000 = 0.15

Inventories = $250/$1,000 = 0.25

Net fixed assets = $600/$1,000 = 0.60

Next year's sales = current sales*(1+growth rate)

= $1,000*(1 +0.14) = $1,140

Project cash next year = project sales*cash to sales ratio = $1,140*0.15 = $171

Project accounts receivable = $1,140*0.15 = $171

Projected inventories = $1,140*0.25 = $285

Projected Net fixed assets = $1,140*0.60 = $684

Projected total operating assets =

= $(171 + 171+ 285 + 684)

= $1,311

jeff jeffy answered 2 years ago
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