Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company projects that next year's sales will grow 17% and ROA (net income divided by the previous year's total assets) is constant at 11%,

A company projects that next year's sales will grow 17% and ROA (net income divided by the previous year's total assets) is constant at 11%, 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 $5000 and $900. Accounts payable usually grow at the same rate as sales. The company's plowback ratio is always 70%. Assuming that total assets must grow at the same speed as sales, what is next year's external financing need?

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

The Strategies Of Chinas Firms Resolving Dilemmas

Authors: Hailan Yang, Stephen Morgan , Ying Wang

1st Edition

0081002742,0081002769

More Books

Students also viewed these Finance questions