Use the percent of sales forecasting method to determine the discretionary financing needed (DFN) for DRE Corporation for the year 2014. Sales for 2014 are expected to increase by $300 to a level of $1,300. The firm is running efficiently and at full capacity so that all assets and spontaneous liabilities are expected to increase proportionately with sales. The dividend payout ratio for 2014 will be 40%. Sales for the year 2013 were $1,000 and net income for 2013 was $120. Assume the profit margin for 2014 will not change.

2013 Percent 2014

Balance Sheet of Sales Balance Sheet

Assets

Cash $100

Acct. Receivable 300

Inventory 250

Fixed Assets 850

Total $1,500

Liabilities and Equity

Accts. Payable $180

Accruals 20

Long-term Debt 900 900

Common Stock 100 100

Retained Earnings 300

Total $1,500