33. Clyde's Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same relationships the past couple of years; these relationships are anticipated to hold in the future. Clyde's has excess capacity, so there is no expected increase in capital assets. Income Statement Sales. Cost of goods sold Gross profit.. Selling and administrative expense... Amortization. Earnings before interest and taxes.. Interest. Earnings before taxes... Taxes... Earnings available to common shareholders... Dividends paid. $2,000,000 1,260,000 740,000 400,000 55,000 285,000 50,000 235,000 61,000 $ 174.000 $ 104,400 Page 134 Balance Sheet Assets Liabilities and Shareholders' Equity Cash $ 30,000 Accounts payable....... S 105,000 Accounts receivable... 260,000 Accruals 20,000 Inventory 210,000 Bank loan. 150,000 Current assets......... 500,000 Current liabilities............. 275,000 Capital assets. 550,000 Long-term debt... 200,000 Common stock 175,000 Retained earnings. 400,000 Total assets. $1,050,000 Total liabilities and equity.. 1,050,000 a. Using a percent-of-sales method, determine whether Clyde's can handle a 30 percent sales increase without using external financing. If so, what is the need? b. If the average collection period of receivables could be held to 43 days, what would the need be for external financing? All other relationships remain the same. c. Suppose the following results with the increased sales of $600.000. 43 days Cash increases by $5,000 Average collection period Inventory turnover (COGS). Capital assets increase by.. $125,000 Accounts payable increase.. in proportion to sales Accruals. no change Long-term debt decreases by. $25,000 Gross profit margin 40% Selling general and administrative expense increase by $50.000 Amortization increases by... $12,500 Interest decreases by $10,000 Tax rate. 35% Dividends increase to... $120,000 What new funds would be required? The first $75.000 of any new funds would be short-term debt and then long-term debt. Prepare the pro forma balance sheet