The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 30 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 $ 749,000 Costs 584,000 Other expenses 20,000 Earnings before interest and taxes $ 145,000 Interest paid 16,000 Taxable income $ 129,000 Taxes (21%) 27,090 Net income $ 101,910 Dividends $ 31,592 Addition to retained earnings 70,318 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 20,840 Accounts payable $ 55,000 Accounts receivable 43,780 Notes payable 14,200 Inventory 93,960 Total $ 69,200 Total $ 158,580 Long-term debt $ 132,000 Fixed assets Owners’ equity Net plant and equipment $ 425,000 Common stock and paid-in surplus $ 115,500 Retained earnings 266,880 Total $ 382,380 Total assets $ 583,580 Total liabilities and owners’ equity $ 583,580 If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

100%

The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 30 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		$ 749,000
Costs		584,000
Other expenses		20,000

Earnings before interest and taxes		$ 145,000
Interest paid		16,000

Taxable income		$ 129,000
Taxes (21%)		27,090

Net income		$ 101,910

Dividends	$ 31,592
Addition to retained earnings	70,318

CROSBY, INCORPORATED
Balance Sheet as of December 31, 2020
Assets		Liabilities and Owners’ Equity
Current assets		Current liabilities
Cash	$ 20,840	Accounts payable	$ 55,000
Accounts receivable	43,780	Notes payable	14,200

Inventory	93,960	Total	$ 69,200

Total	$ 158,580	Long-term debt	$ 132,000

Fixed assets		Owners’ equity
Net plant and equipment	$ 425,000	Common stock and paid-in surplus	$ 115,500
		Retained earnings	266,880

		Total	$ 382,380

Total assets	$ 583,580	Total liabilities and owners’ equity	$ 583,580

If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales?

Expert Solution