32. The Longbranch Western Wear Company has the following financial statements, which are representative of the Page 133 company's historical average. Income Statement Sales $200,000 Expenses 158,000 Earnings before interest and taxes 42.000 Interest. 2,000 Earnings before taxes. 40,000 Taxes 20.000 Earnings after taxes. $ 20,000 Dividends. $ 10,000 Assets Cash Accounts receivable.... Inventory Current assets Capital assets. Balance Sheet Liabilities and Shareholders' Equity $ 5.000 Accounts payable....... $5,000 10.000 Accrued wages. 1,000 15,000 Accrued taxes. 2,000 30,000 Current liabilities 8,000 70.000 Notes payable. 7.000 Long-term debt 15.000 Common stock. 20.000 Retained earnings 50.000 $100,000 Total liabilities and equity.... $100,000 Total assets. Longbranch is expecting a 20 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of capital assets; instead, it will be done through more efficient asset utilization in the existing stores. Of liabilities, only current liabilities vary directly with sales. (Refer to the example in the chapter and show all calculations). a. Using a percent-of-sales method. determine whether Longbranch Western Wear has external financing needs. b. Prepare a pro forma balance sheet with any financing adjustment made to notes payable. c. Calculate the current ratio and total debt to assets ratio for each year