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What is the required external financing over the next year?

What is the required external financing over the next year?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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? 

The 2019 financial statements for Growth Industries are presented below. Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends Addition to retained earnings Current assets Cash INCOME STATEMENT, 2019 Total assets Assets Accounts receivable Inventories Total current assets Net plant and equipment $ 21,488 $ 32,232 $ 3,000 8,000 29,000 $ 40,000 210,000 $ 270,000 185,000 $ 250,000 $ $ 85,000 17,000 68,000 14,280 $ 53,720 BALANCE SHEET, YEAR-END, 2019 Current liabilities Accounts payable Liabilities Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Total liabilities plus stockholders' equity $ 10,000 $ 10,000 170,000 15,000 55,000 $ 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 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.
Transcribed Image Text:The 2019 financial statements for Growth Industries are presented below. Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends Addition to retained earnings Current assets Cash INCOME STATEMENT, 2019 Total assets Assets Accounts receivable Inventories Total current assets Net plant and equipment $ 21,488 $ 32,232 $ 3,000 8,000 29,000 $ 40,000 210,000 $ 270,000 185,000 $ 250,000 $ $ 85,000 17,000 68,000 14,280 $ 53,720 BALANCE SHEET, YEAR-END, 2019 Current liabilities Accounts payable Liabilities Total current liabilities Long-term debt Stockholders' equity Common stock plus additional paid-in capital Retained earnings Total liabilities plus stockholders' equity $ 10,000 $ 10,000 170,000 15,000 55,000 $ 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 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.
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.) X Answer is complete but not entirely correct. 61,625 X External financing $
Transcribed Image Text: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.) X Answer is complete but not entirely correct. 61,625 X External financing $
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