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Stock holders balance sheet



1. Scott Equipment Organization Paper Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $30 million in current assets and $35 million in fixed assets in its operations next year, provided the above level of assets. Anticipated sales and EBIT for next year are $60 million and $6 million, respectively. The organization’s income tax rate is 40%. Stockholders’ equity will be used to finance $40 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies in the diagram. Financial Policy STD Millions of dollars LTD (%) STD (%) Aggressive (large amount of short-term debt) $24 8.5 5.5 Moderate (moderate amount of short-term debt) $18 8.0 5.0 Conservative (small amount of short-term debt) $12 7.5 4.5 • Determine the following for each policy: o Expected rate of return on stockholders’ equity o Net working capital position o Current ratio • Determine: Would you rate them low, medium, or high with respect to profitability? Would you rate them low, medium, or high with respect to risk? • You may wish to present your conclusions in table form. Accounting Assignment Help, Accounting Homework help, Accounting Study Help, Accounting Course Help


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