| S&S Air, Inc. 2021 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 419,970 Accounts payable $ 854,685 Accounts receivable 674,475 Notes payable 1,951,642 Inventory 988,129 Total liabilities $ 2,806,327 Total current assets $ 2,082,574 Long-term debt $ 5,100,000 Fixed assets Net plant and equipment Shareholder equity Common stock $ 410,000 Retained earnings 10,071,803 Total equity $ 10,481,803 Total assets $ 18,388,130 Total liabilities and equity $ 18,388,130 - S&S Air is planning a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the companys sales increase at this growth rate?
- Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, the case the company has a staircase, lumpy fixed cost structure. Assume that S&S Air is currently producing at 100 percent full capacity. As a result, to increase production, the company must set up an entirely new line at a cost of $5,000,000. Calculate the new EFN with this assumption. What does this imply about capacity utilization for the next year?
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