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LONG-TERM FINANCING NEEDED At year-end 2021, total assets for Arrington Inc. were $1.8 million and...

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Finance

LONG-TERM FINANCING NEEDED At year-end 2021, total assets for Arrington Inc. were $1.8 million and accounts payable were $450,000. Sales, which in 2021 were $3.0 million, are expected to increase by 25% in 2022. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $500,000 in 2021, and retained earnings were $475,000. Arrington plans to sell new common stock in the amount of $130,000. The firms profit margin on sales is 5%; 35% of earnings will be retained. a. What were Arringtons total liabilities in 2021? b. How much new long-term debt financing will be needed in 2022? (Hint: AFN 2 New stock 5 New long-term debt.) In addition, provide two or more suggestions on what Arrington, Inc. could do to reduce the forecasted debt financing (the managerial part of financing). Why your suggestions will be effective in reducing the forecasted debt financing need?

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