In: Finance
At year-end 2016, total assets for Arrington Inc. were $1.6 million and accounts payable were $440,000. Sales, which in 2016 were $2.7 million, are expected to increase by 30% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $460,000 in 2016, and retained earnings were $255,000. Arrington plans to sell new common stock in the amount of $55,000. The firm's profit margin on sales is 5%; 60% of earnings will be retained.