The most recent financial statements for Assouad, Inc., are shown here: Balance

Question

The most recent financial statements for Assouad, Inc., are shown here: Balance Sheet ncome Statement Sales Costs ent 3150 iabilities Current $ 8100 assets $2,175 Long-term 5,650 Fixed assets 8,700 3,770 Taxable ncome $2,450 Equity 5,905 Taxes (22%) 539 Total $11,850 Total $11,850 Net income $ 1,911 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 35 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 18 percent What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) External financing needed

Explanation / Answer

External financing Needed =  275.76

Retained earnings are calculated as .......... Net Income * ( 1 + g ) * b

g = growth rate = 0.18

b = retention ratio = 1 - 0.35 = 0.65

1911 * 1.18 * 0.65 = 1465.737

External Financing Needed Increase in Current Assets 567 Increase in Fixed assets 1566 Increase in Total assets 2133 (-) Spontanious Increase in CL -391.5 (-) Retained earnngs available -1465.74 External financing needed = 275.76

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