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If all assets and current liabilities are expected to

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Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year.

Assets Liabilities and Equity

  • Current assets $ 2,000,000 Current liabilities $ 1,500,000
  • Fixed assets 4,000,000 Long-term debt 1,500,000
  • Equity 3,000,000

Total assets $ 6,000,000 Total liabilities and equity $ 6,000,000

If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth?

Reference no: EM13601533

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