Income Statement Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends $8,49,100 6,70,789 1,78,311 8,491 1,69,820 84,910 $84,910 $42,455 Assets Cash Account receivab Inventory Current assets Capital assets Balance Sheet Liabilities and Shareholders' Equity $21,228 Accounts payable $21,228 42,455 Accrued wages 4,246 63,683 Accrued taxes 8,491 1,27,365 Current liabilities 33,964 2,97,185 Notes payable 29,719 Long-term debt 63,683 Shareholders' Equity Common shares 84,910 Retained earnings 2,12,275 Total liabilities $4,24,550 and shareholders' equity $4,24,550 Total assets Suzy Muffins is expecting a 20 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of capital assets; instead it will be done through more efficient asset utilization in the existing stores. Of liabilities, only current liabilities vary directly with sales. a. Using the percent-of-sales method, determine whether Suzy Q Muffins has external financing needs.(9 marks) % expected increase 202 Profit margin Payout ratio Change in sales ($) Spontaneous assets as % of sales Spontaneous liabilities as % of sales Does your company require funds? Explain based on your calculations (2 marks): Change in assets Change in liabilities Change in retained earnings External funding needed c. Calculate the current ratio and total debt to assets ratio for each year ( 4 marks). Discuss your findings (4 marks) b. Prepare a pro forma balance sheet with any financing adjustment made to notes payable. (8 marks) Balance Sheet Assets Liabilities and Shareholders' Equity Cash Accounts payable Account receivable Acorued wages Inventory Accrued taxes Current assets Current liabilities Capital assets Notes payable Long-term debt Shareholders' Equity Common shares Retained earnings Total liabilities Total assets and shareholders' equity