Receivable Financing or Inventory Financing. Large Corporation has liquidity problems. Most of its sales are made to small customer accounts. Relevant balance sheet data for 20X1 are:
ASSETS
Current assets
Cash $ 35,000
Receivables 410,000
Inventory (primarily consisting
of finished goods and raw materials) 360,00
Total current assets $ 805,000
Fixed assets 600,000
Total assets $1,405,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $350,000
Loans payable 320,000
Accrued expenses 56,000
Total current liabilities $ 726,000
Bonds payable 225,000
Total liabilities $ 951,000
Stockholders’ equity
Common stock $300,000
Retained earnings
Total stockholders’ equity 154,000 454,000
Total liabilities and
stockholders’ equity $1,405,000
Relevant income statement data are:
Sales $2,400,000
Net income $480,000
Given the balance sheet and income statement data: (a) Is receivable financing likely? (b) Is inventory financing likely?