Suppose that Gyp Sum Industries currently has the balance sheet shown below, and

Question

Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10.8 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.8 million next year. ASSETS LIABILITY AND EQUITY Current assests 2,544,000 Current Liabilities 2,423,520 Fixed assets 4,800,000 Long-term debt 1,900,000 Total Assets 7,344,000 Equity 3,020,000 Total Liabilities and equity $7,344,000 If all the assets and current labilities are expected to shrink with sales, what amount of additional funds ill Gyp Sum Industries nee from external sources to fund the expected growth. ( Enter answer n dollars ot million. Negative amount should be indicted by a minus sign). What are the additional funds needed

Explanation / Answer

Current Balance sheet at sales of 10.8 million

Projected Profit and Loss Account

Balance sheet at sales of 8.8 million

Differential funds required are $ 4,17,267 or 0.4 million dollars to reach current situation

Liabilites Amount Assets Amount Current Liabilities 2423520 current assets 2544000 long term debt 1900000 fixed assets 4800000 equity 3020480 Total 7344000 Total 7344000

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