Jolly Joe\'s Novelties, Inc. had the financial data shown below last year. Jolly
ID: 2774532 • Letter: J
Question
Jolly Joe's Novelties, Inc. had the financial data shown below last year. Jolly Joe's has just invented a new toy which they expect will cause sales to double from $100,000 to $180,000, increasing net income to $12,000. From experience the company knows that when sales changes, all current assets plus accounts payable and accrued expenses change at the same percentage rate
a. Will Jolly Joe's need any new outside funding if they pay no dividends?
b. If so, how much will be needed?
, and the company feels they can handle the increase without adding any fixed assets
Explanation / Answer
Original Assets Equity and Liability Fixed Assets (assumed) 1,00,000 Debt (assumed) 30,000 Current Assets 16666.6 Equity (assumed) 80000 Retained Earnings 6667 Total 1,16,667 Total 1,16,667 New Assets Equity and Liability Fixed Assets (assumed) 1,00,000 Debt 30,000 Current Assets 30000 Equity 80000 Retained Earnings 12000 Total 1,30,000 Total 1,22,000 External Finance required 8000 Hence a total external finace of $8000 will be required as shown in th calculation
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.