BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Accounts payable Total current liabilities $ 10,000 $ 10,000 Cash $ 3,000 8,000 29,000 $ 40,000 280,000 Accounts receivable Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Inventories 240,000 Total current assets Net plant and equipment 15,000 55,000 Total assets $ 320,000 Total liabilities plus stockholders' equity $ 320,000 Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 70% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.30. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![The 2019 financial statements for Growth Industries are presented below.
INCOMΕ STATEΜENT , 2019
$ 340,000
220,000
$ 120,000
24,000
$ 96,000
20,160
$
Sales
Costs
EBIT
Interest expense
Taxable income
Taxes (at 21%)
Net income
75,840
$ 22,752
$ 53,088
Dividends
Addition to retained earnings
BALANCE SHEET, YEAR-END, 2019
Assets
Liabilities
Current assets
Current liabilities
$ 10,000
$ 10,000
240,000
Cash
$
3,000
Accounts payable
Accounts receivable
8,000
Total current liabilities
29,000
Long-term debt
Stockholders' equity
Common stock plus additional paid-in capital
Retained earnings
Inventories
Total current assets
$
40,000
Net plant and equipment
280,000
15,000
55,000
Total assets
$ 320,000
Total liabilities plus stockholders' equity
$ 320,000
Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are
projected to rise in proportion to sales. The firm is currently operating at 70% capacity, so it plans to increase fixed assets in proportion
to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout
ratio of 0.30.
What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8e615c75-2a0b-4a42-8159-bcac2309173b%2F6b090927-02c8-42a2-a0e3-6ab7ff8c5aa4%2Fvmjfue6_processed.png&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)