Danilo ltd has established a linear relationship between its sales revenue and the balance sheet items as follows:

Balance Sheet as at 31 December, 2023.

	2023 Ksh 000	% of sales
Property, Plant & Equipment	382,500	30%
Current assets	318,750
Current liabilities	280,500
Long-term debt	200,000
Share Capital	212,000
Retained earnings	8,750

Profit after tax represents 6% of sales every year. Corporation tax rate is 30%.

The company forecasts that sales will grow at a rate of 12% p.a for four years. Property, plant and equipment; current assets and current liabilities are to maintain their relationship with sales as per the 2023 figures.

The long term debt will be settled in the year 2026.

Required:

Calculate the external financing or surplus at the end of the year 2027.

 

Answer rating: 100% (QA)

Calculating External Financing for Danilo Ltd in 2027 Heres how we can calculate the external financ... View the full answer