Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that current assets, costs, and accounts payable maintain a constant ratio to sales. The firm retains 40% of earnings. If the firm is producing
Suppose that current assets, costs, and accounts payable maintain a constant ratio to sales. The firm retains 40% of earnings. If the firm is producing at only 90% capacity, what is the total external financing needed if sales increase 25%?
\begin{tabular}{|c|r|c|r|} \hline StoneRosesCo.BalanceSheet & & & \\ \hline Cash & $50 & Accounts payable & $100 \\ \hline Inventory & $150 & Notes payable & 100 \\ \hline Fixed assets & $600 & Long-term debt & 350 \\ \hline & & Equity & 250 \\ \hline Total assets & $800 & Totalliabilities&equity & $800 \\ \hline \end{tabular} \begin{tabular}{|c|r|} \hline Stone Roses Co. Income statement & \\ \hline Sales & $800 \\ \hline Costs & 600 \\ \hline EBT & $200 \\ \hline Taxes (34\%) & 68 \\ \hline Net income & $132 \\ \hline \end{tabular}Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started