Barnes Company Has Highly Seasonal Sales and Financing Requirements

Multiple Choice

Barnes Company has highly seasonal sales and financing requirements. Barnes has made the following projections of its asset needs and net additions to retained earnings over the next year (in $ million) .
Net worth (equity) at the beginning of the year is $50 million. The company does not plan to sell any new equity during the coming year. Assume that Barnes follows a matching approach to finance its assets, i.e., long-term debt and equity are used to finance fixed and permanent current assets and short-term debt is used to finance fluctuating current assets. Determine the amount of long-term and short-term debt respectively outstanding at the end of the third quarter ($ million) .

A) $39; $2
B) $48; $0
C) $41; $7
D) none of the above/cannot be determined