Guo Company has stockholders’ equity of $400,000 and net income of $66,000. It has a payout ratio of 20% and a return on assets

Answer and Explanation:

a. The calculation of the net operating income is detailed below:

Sales                          $800,000

Less: Variable cost  -$381,000

Contribution margin $419,000

Less:  Fixed manufacturing expenses - $263,000

Less: Fixed selling and administrative expenses - $211,000

Net operating income or (Loss) -$55,000

b. The analysis of the financial impact of discontinuing product D14E is as follows:

Sales                          $800,000

Less: Variable cost  -$381,000

Contribution margin $419,000

Less:  Fixed manufacturing expenses - $202,500

Less: Fixed selling and administrative expenses - $117,500

Financial disadvantage -$99,000

Since there is a financial disadvantage, the product should not be discontinued

We simply utilized the aforementioned equation

Response: arrogant or overly confident

Clarification:

A short term loan is the most suitable financing choice for a neighborhood Lemonade stand as it qualifies as a small business.

Explanation:

This type of loan is designed to meet the capital requirements of small enterprises. Typically, these loans are to be repaid within a year. The interest paid on short-term loans tends to be lower in comparison to long-term loans.

Banks readily provide these loans as they promote small business initiatives. In the case of short term loans, the risk is generally minimal, and the profit can be substantial if the business is successful. Therefore, for a small venture like a lemonade stand, a short-term loan represents the most advantageous borrowing solution.