(Marks: 20) The Longbranch Western Wear Company has thefollowing financial statements, which are representative of the companyshistorical average.Income StatementSales............................................ $200,000Expenses.................................... 158,000Earnings before interest and taxes 42,000Interest...................................... 2,000Earnings before taxes............ 40,000Taxes.......................................... 20,000Earnings after taxes................ $ 20,000Dividends.................................. $ 10,000Balance SheetAssets Liabilities and Shareholders EquityCash..............................$ 10,000 Accounts payable............... $ 5,000Accounts receivable..... 10,000 Accrued wages................... 1,000Inventory......................15,000 Accrued taxes..................... 2,000Current assets............. 35,000 Current liabilities................ 8,000Capital assets................70,000 Notes payable...................... 7,000Long-term debt.................... 15,000Common stock (at Par) 20,00020,00Paid In Capital 5,000Retained earnings 50,000 Total assets...................$105,000Total Common Equity 75,000Total liabilities and equity.... $105,000Longbranch is expecting a 20 percent increase in sales next year, andmanagement is concerned about the companys need for external funds.The increase in sales is expected to be carried out without any expansionof capital assets; instead, it will be done through more efficient assetutilization in the existing stores. The Dividends Payout Ratio remainsunchanged and forecasted taxes are $24,400.a). Using a percentofsales method, determine whether Longbranch WesternWear has external financing needs.b). Prepare a pro forma income statement and balance sheet with any financingadjustment made to notes payable, i.e including the external financing needs (theplug). If external financing is not required, excess funds are first used to reducenotes payable with the difference going towards reducing long-term debt.c). Calculate the current ratio and total debt to assets ratio for each year