What amount of additional funds will the company need

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Reference no: EM132020025

Suppose that Wave Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $25 million.

The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $27 million next year.

If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?

Assets

Current Assets $6,500,000

Fixed Assets $13,000,000

Total Assets $19,500,000

Liabilities & Equity

Current Liabilities $4,000,000

Long Term Debt $6,500,000

Equity $9,000,000

Total Liabilities and Equity $19,500,000

Reference no: EM132020025

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