Wilson is currently operating at maximum capacity. The firm has a net income of $2,250, total assets of $24,600, long-term debt of $9,800, accounts payable of $2,700, dividends of $900, and total equity of $12,100. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 5 percent?

As a result in the increase in sales, the firm debt will decrease by 187.5 dollars

Explanation:

income of 2,250

dividends of 900

payout ratio: 900/2,250 = 0.4

income will increase by 5%

2,250 x 1.05 = 2,362.5‬

retained earnings break even:

2,362.5 x ( 1 - 0.4) = 1,417.5

increase in assets:

24,600 x 0.05 = 1,230

now we post this into the accounting equation:

Assets = liab+ equity

+1,230 = liab + 1,417.5

liab = -187.5

answer utilities; more money you have to pay out ; )

consumer credit. an advantage is that it allows consumers to afford expensive goods and services now, increasing their standard of living. however, a disadvantage is that it creates a trap for debt, if people do not have self control, they may see themselves filing personal bankruptcy.