President Letter Assignment 2

President Letter Assignment 2 - President Kline The Master...

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President Kline, The Master Budget for the second quarter has been completed and attached. In brevity, let me explain some of the key points that should be pointed out: Our company is growing rapidly and impressively. If our sales estimates are correct, we should expect to see our assets to grow 47% in the next quarter with a 133% change in liabilities. However, our liabilities- to-asset ratio will be decreased from 17% to 15.4% assuming correct sales and other expectations. To fund this increase, we will need to be able to borrow $127,000 over two intervals in April and May, and carry $102,000 of that loan at least beyond the second quarter. That is, if we continue with our $10,000 minimum cash balance requirement: $20,000 of the loan amount will be from attempting to reach that minimum balance. The primary need for the loan will derive from our need for $722,500 of purchases to match our sales expectations. Our retained earnings will also increase roughly 86%. Our net income from the quarter ended will be $151,880 drawn from $1,120,000 in sales.
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