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Firms assets and liabilities all vary proportionately

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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%?

Income Statement  2015
   
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

Reference no: EM131771643

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