The following summarized financial statements relate to Jasmin Ltd for the year ended 31 October 2018 Income statement Sh.000 Sales 450,000 Profit before tax 81,000 Less: taxation 27,000 Profit after tax 54,000 Dividend 13,500 Retained earnings 40,500

Balance sheet Sh.000 Sh.000 Non-current assets 285,000 Current assets 219,000 Less: current liabilities (154,500) Working capital 64,500 Net assets 349,500

Financed by: Ordinary share capital 75,000 Reserves 135,000 Shareholder equity 210,000 Longterm liability Bank loan 139,500 Total equity and long term liability 349,500

The company is in the process of preparing a financial budget for the year ending 31 October 2019.

Additional information:

1) From past experience, the management of the company have determined that for each sh.1 of additional sales, a total investment of sh.1.50 in fixed assets, stock and debtors would be required.

2) The management have also determined that, for each sh.1.00 of additional sales, the company would require trade credit amounting to sh.0.60

3) The company has maintained a constant dividend payout ratio.

4) Any requirements for internal funds are to be met from the retained earnings for the year ending 31 October 2019.

Required

1. External finance (if any) required in year 2019 assuming that the sales for the year increase by 20%. (7 Marks)

2. Expected maximum growth in sales in year 2019 assuming that the company only utilizes internal funds. (2 Marks)

3. Briefly explain three limitations of your estimates in (b) (i) above. (1 Marks)