The following data pertain to XYZ Company. Net income is assumed to be 8% of sales and
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Question:
The following data pertain to XYZ Company. Net income is assumed to be 8% of sales and the dividend payout ratio is 40%.
The company expects its sales to increase its sales from 400,000 in 20X1 to 600,000 in 20X2. In this problem, all the asset accounts (including fixed assets) and current liabilities vary directly with sales. The company is operating at full capacity.
Required:
a) Formulate a pro-forma balance sheet
b) Use the simple formula to determine the external funds needed by the company based on your answer in part (a)
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