Answer all 4 questions: 1)Consider the following simplified financial statements

Question

Answer all 4 questions:

1)Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes):

$8,200  

$10,000  

$10,000  

Calculate the dividend paid.

2) The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes):

$1,480  

$15,100  

$15,100  

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,970.

What is the external financing needed?

3)The most recent financial statements for GPS, Inc., are shown here:

16,300  

$120,000  

$120,000  

$4,225  

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,640 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $27,700.

What is the external financing needed?

4)

The most recent financial statements for Summer Tyme, Inc., are shown here:

2,300  

$10,000  

$10,000  

$1,242  

Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 20 percent.

What is the external financing needed?

1)Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes):

Explanation / Answer

(1) Sales are expected to increase by 9% and every item on the balance sheet is expected to increase by 9% as well.

Next Year Figures:

Sales = $ 21000 x1.09 = $ 22890

Cost = $ 12800

Net Income = $ 10090

Assets increase by $900 which has to be supported by an equivalent increase in retained earnings or that portion of earnings which is plowed back into the business. In such a scenario the external financing needed would be zero, as the asset increase (capital accumulation) is entirely financed by an equivalent increase in the sources of capital (namely equity and debt).

Therefore, Increase in Asset - Increase in Liability = Increase in Retained Earnings

900 - 450 = 10090 - Dividends Paid

Dividends Paid = $ 9640

NOTE: Please raise separate queries for solutions to the remaining unrelated questions.

Asset 10000 x 1.09 = $ 10900 Debt 5000 x 1.09 = $ 5450 Equity 5000 x 1.09 = $ 5450 Total $ 10900 Total $ 10900

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