Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company projects that next year's sales will grow 12% and ROA (net income divided by the previous year's total assets) is constant at 7%,

A company projects that next year's sales will grow 12% and ROA (net income divided by the previous year's total assets) is constant at 7%, but long-term debt and equity do not change with sales automatically (except for the new retained earnings). The current year's total assets and accounts payable are $3000 and $700. Accounts payable usually grow at the same rate as sales. The company's plowback ratio is always 30%. Assuming that total assets must grow at the same speed as sales, what is next year's external financing need (round to the closest whole number and the answer could be negative)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forecasting Principles And Practice

Authors: Rob J Hyndman, George Athanasopoulos

3rd Edition

0987507133, 978-0987507136

More Books

Students also viewed these Finance questions