Please refer to the hypothetical financial statements below. Assume a constant profit margin and dividend payout ratio. Also, assume that this firm’s assets and liabilities all vary proportionately with sales. If sales are projected to increase by 10 percent, what is the external financing needed for the following year? Hint: In order to determine this amount, you must first construct a forecasted income statement. What if sales are expected to increase by 20%?
| | 2015 |
| Income Statement | |
| Sales | 17300 |
| Cost of goods sold | 10600 |
| Depreciation | 3280 |
| EBIT | 3450 |
| Interest | 680 |
| EBT | 2770 |
| Tax | 940 |
| Net Income (EAT) | 1830 |
| Dividends | 450 |
| | |
| Balance Sheet | |
| Assets | |
| Current assets: | |
| Cash and securities | 350 |
| Accounts receivable | 940 |
| Inventories | 2360 |
| Total current assets | 3650 |
| Net fixed assets | 10850 |
| Total assets | 14500 |
| | |
| Liabilities and owners’ equity | |
| Current liabilities | |
| Bank loan | 0 |
| Accounts payable | 1920 |
| Total current liabilities | 1920 |
| Long-term debt | 3500 |
| Common stock | 7500 |
| Retained earnings | 1580 |
| Total liabilities and owners’ equity | 14500 |
Internal
