The Suzy Q Muffins Company has the following financial statements, which are
representative of the company's historical average.
Income Statement
Sales		$570,700
Expenses		450,853
Earnings before interest and taxes	119,847
Interest		5,707
Earnings before taxes	114,140
Taxes		57,070
Earnings after taxes	$57,070
Dividends		$28,535
		Balance Sheet
Assets			Liabilities and Shareholders' Equity
Cash	$14,268		Accounts payable	$14,268
Account receivable	28,535		Accrued wages	2,854
Inventory	42,803		Accrued taxes	5,707
Current assets	85,605		Current liabilities	22,828
Capital assets	199,745		Notes payable	19,975
			Long-term debt	42,803
			Shareholders' Equity
			Common shares	57,070
			Retained earnings	142,675
			Total liabilities
Total assets	$285,350		and shareholders' equity	$285,350

Suzy Q. 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) $6 expected increase 20% Profit margin Payout ratio Change in sales ($) 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 b. Prepare a pro forma balance sheet with any financing adjustment made to notes payable. c. Calculate the current ratio and total debt to assets ratio for each year ( 4 marks (8 marks) Discuss your findings (4 marks) Balance Sheet Assets Liabilities and Shareholders' Equity Cash Accounts payable Account receivable Accrued wages Inventory Accrued taxes Current assets Current liabilities Capital assets Notes payable Long-term debt Shareholders' Equity Common shares Retained earnings Total liabilities sholders' eo