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		$	100
Short-term investments		$	95
Accounts receivable		$	250
Inventories		$	300
Total current assets		$	745
Net fixed assets		$	450
Total assets		$	1,195

Sales are expected to grow by 10% 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

Total Operating assets = Cash + Accounts receivable + Inventories + Net fixed assets

• Short term investments are included in Non operating assets.

We will first calculate ratio of each operating asset to sales

Cash/sale = 100/1000 = 0.1

Accounts receivables/sale = 250/1000 = 0.25

Inventory/sales = 300/1000 = 0.30

Net fixed asset/Sale = 450/1000 = 0.45

Growth rate = 10%

Next year sale = 1000 * 1.1 = 1100

Operating assets next year,

Cash = 0.1 * 1100 = 110

Accounts receivable = 0.25 * 1100 = 275

Inventory = 0.30 * 1100 = 330

Fixed assets = 0.45 * 1100 = 495

Projected total operating assets = 110 + 275 + 330 + 495 = $1,210

We can also calculate it by multiplying total operating cost * growth rate = 1100 * 1.1 = 1210

Hence the total operating cost for next year is $1,210.

If you have any doubts please let me know in the comments. Please give a positive rating if the answer is helpful to you. Thanks.