Question:

To begin, consider the percentage of sales formula used to determine external funds needed:

External funds needed= Required increase in assets - spontaneous increase in liabilities - Increase in retained earnings

EFN = (A/S)DS - (L/S)DS - MS..1 (1-d)

A= assets, S= current sales, L= accounts payable and accrued wages and taxes, M= net income/sales, d= dividendset income. DS= projected increase in sales, S..1= projected sales. See Table 1 for 1992.