The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 $ 25,640 35,100 71,780 $ 132,520 Fixed assets Net plant and equipment $ 224.000 767,000 623,000 31,000 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 113,000 15,600 $ 97,400 23 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings $ 63,000 18,800 $ 81,800 $ 115.000 $ 114,000 45.720 Total $ 159,720 $ 356,520 Total liabilities and owners' equity $ 356,520 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 $ 25,640 35,100 71,780 $ 132,520 Fixed assets Net plant and equipment $ 224.000 767,000 623,000 31,000 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 113,000 15,600 $ 97,400 23 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings $ 63,000 18,800 $ 81,800 $ 115.000 $ 114,000 45.720 Total $ 159,720 $ 356,520 Total liabilities and owners' equity $ 356,520 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are
projected to grow by 25 percent. Interest expense will remain constant; the tax rate and
the dividend payout rate will also remain constant. Costs, other expenses, current
assets, fixed assets, and accounts payable increase spontaneously with sales.
Sales
Costs
Other expenses
CROSBY, INCORPORATED
2020 Income Statement
Earnings before interest and
taxes
Interest paid
Taxable income
Taxes (24%)
Net income
Dividends
Addition to retained earnings
Current assets
Cash
Accounts receivable
Inventory
Total
Total assets
$ 23,440
50,584
Fixed assets
Net plant and equipment $ 224,000
EFN
$ 25,640
35,100
71,780
$ 132,520
CROSBY, INCORPORATED
Balance Sheet as of December 31, 2020
Assets
$
767,000
623,000
31,000
$ 356,520
$ 113,000
15,600
$ 97,400
23.376
$ 74,024
Liabilities and Owners' Equity
Current liabilities
Accounts payable
Notes payable
Total
Long-term debt
Owners' equity
Common stock and paid-in
surplus
Retained earnings
Total
$ 114,000
45,720
$ 159,720
Total liabilities and owners' equity $356,520
$ 63,000
18,800
$ 81,800
$ 115,000
What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round
Intermediate calculations and round your answer to the nearest whole number, e.g.,
32.)
Answer is complete but not entirely correct.
s
8.125 X
Expert Solution
Step 1
In business, borrowing money from banks or investors is referred to as external finance. Since it originates from an outside source rather than the company itself, it is effectively external. External financing is significant when it comes to a company's overall financial situation because it can aid in business expansion.
The amount of outside funding a business needs to continue to be profitable is known as the external financing needed, or EFN. Since it shows the precise amount that the business needs to borrow from lenders and other external sources, EFN is crucial to comprehend.
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