Suppose you manage Campbell Appliance. The store’s summarized financial statements for 2012, the most recent year, follow:
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CAMPBELL APPLIANCE Income Statement Year Ended December 31, 2012
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Sales |
$800,000 |
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Cost of goods sold |
660,000 |
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Gross profit |
$140,000 |
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Operating expenses |
100,000 |
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Net income |
$ 40,000 |
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CAMPBELL APPLIANCE Balance Sheet December 31, 2012 |
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Assets |
Liabilities and Equity |
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Cash |
$ 30,000 |
Accounts payable |
$ 35,000 |
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Inventories |
75,000 |
Note payable |
280,000 |
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Land and buildings, net |
360,000 |
Total liabilities |
$315,000 |
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Total assets |
$465,000 |
Stockholders’ equity |
150,000 |
Assume that you need to double net income. To accomplish your goal, it will be very difficult to raise the prices you charge because there is a Best Buy nearby. Also, you have little control over your cost of goods sold because the appliance manufacturers set the price you must pay.
Requirement
1. Identify several strategies for doubling net income. (Challenge)