A. Abbreviated financial Statements for Archimedes Levers are shown in the follo

Question

A. Abbreviated financial Statements for Archimedes Levers are shown in the following table. If sales increase by 10% in 2011 and all other items, including debt, increase correspondingly, what must be the balancing item? What will be its value?

B. What is the maximum possible growth rate for Archimedes if the payout ratio is set at 50% and (a) no external debt or equity is to be issued? (b) the firm maintains a fixed debt ratio but issues no equity?



INCOME STATEMENT




Sales

$4000




Costs, including interest

3,500




Net income

$500













BALANCE SHEET, YEAR END





2010
2009

2010
2009








Assets
$3200
$2700
Debt
$1200
$1033

-
-
-
Equity
2,000
1,667

Total
$3200
$2700
Total
$3200
$2700

Explanation / Answer

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