The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 $ 360,000 230,000 $ 130,000 Sales Costs ЕBIT 26,000 Interest expense Taxable income Taxes (at 21%) Net income $ 104,000 21,840 $ 82,160 Dividends Addition to retained earnings $ 41,080 $ 41,080 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities 5,000 10,000 35,000 $ 50,000 300,000 $ 12,000 $ 12,000 260,000 Cash Accounts payable Accounts receivable Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Inventories Total current assets Net plant and equipment 15,000 63,000 Total assets $ 350,000 Total liabilities plus stockholders' equity $ 350,000 Sales and costs are projected to grow at 30% 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 75% 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 0.50. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)
The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 $ 360,000 230,000 $ 130,000 Sales Costs ЕBIT 26,000 Interest expense Taxable income Taxes (at 21%) Net income $ 104,000 21,840 $ 82,160 Dividends Addition to retained earnings $ 41,080 $ 41,080 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities 5,000 10,000 35,000 $ 50,000 300,000 $ 12,000 $ 12,000 260,000 Cash Accounts payable Accounts receivable Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Inventories Total current assets Net plant and equipment 15,000 63,000 Total assets $ 350,000 Total liabilities plus stockholders' equity $ 350,000 Sales and costs are projected to grow at 30% 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 75% 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 0.50. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The 2019 financial statements for Growth Industries are presented below.
INCOME STATΕMΕNT,
2019
$ 360,000
230,000
$ 130,000
26,000
Sales
Costs
EBIT
Interest expense
$ 104,000
21,840
$
Taxable income
Таxes (at 21%)
Net income
82,160
$ 41,080
$ 41,080
Dividends
Addition to retained earnings
BALANCE SHEET, YEAR-END, 2019
Assets
Liabilities
Current assets
Current liabilities
$
Accounts payable
$
12,000
5,000
10,000
35,000
Cash
Accounts receivable
Total current liabilities
$
12,000
Long-term debt
Stockholders' equity
Common stock plus additional paid-in capital
Retained earnings
Inventories
260,000
$ 50,000
300,000
Total current assets
Net plant and equipment
15,000
63,000
Total assets
$ 350,000
Total liabilities plus stockholders' equity
$ 350,000
Sales and costs are projected to grow at 30% 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 75% 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 0.50.
What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)
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