The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends Addition to retained earnings $ 270,000 185,000 85.000 17,000 68,000 14,280 53,720 $ 21,488 S 32.232 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current liabilities Accounts payable Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Total liabilities plus stockholders' equity Current assets Cash 10.000 10,000 3,000 8,000 29,000 $ 40,000 2$ Accounts receivable Inventories 170.000 Total current assets Net plant and equipment 15,000 55.000 $ 250,000 210,000 Total assets $ 250,000 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 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 0.40. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.) External financing
The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends Addition to retained earnings $ 270,000 185,000 85.000 17,000 68,000 14,280 53,720 $ 21,488 S 32.232 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current liabilities Accounts payable Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Total liabilities plus stockholders' equity Current assets Cash 10.000 10,000 3,000 8,000 29,000 $ 40,000 2$ Accounts receivable Inventories 170.000 Total current assets Net plant and equipment 15,000 55.000 $ 250,000 210,000 Total assets $ 250,000 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 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 0.40. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.) External financing
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 STATEMENT, 2019
Sales
Costs
$
270,000
185.000
85,000
17,000
68.000
14.280
53,720
EBIT
$
Interest expense
Taxable income
Taxes (at 21%)
Net income
Dividends
Addition to retained earnings
$ 21,488
$ 32,232
BALANCE SHEET, YEAR-END, 2019
Assets
Liabilities
Current assets
Cash
Current liabilities
$
Accounts payable
10,000
3,000
8,000
29.000
40,000
210,000
$
10,000
Accounts receivable
Inventories
Total current assets
Net plant and equipment
Total current liabilities
$
Long-term debt
Stockholders' equity
Common stock plus additional paid-in capital
Retained earnings
170,000
15,000
55,000
$ 250,000
Total assets
$ 250,000
Total liabilities plus stockholders' equity
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 0.40
What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)
External financing
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