The most recent financial statements for Bradley, Inc., are shown here (assuming

Question

The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes):

  

  

  

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $9,408. What is the external financing needed? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar. Omit the "$" sign in your response.)

Income Statement   Sales $ 8,400   Costs (5,040 )   Net income $ 3,360

Explanation / Answer

External financing = A0/S0(S1-S0)- L0/S0(S1-S0)-(PM )(S1)(b) External Financig = 26880/8400(9408-8400)-0/8400(9408-8400) -3360/8400(9408)100% = 3225.6 - 3763.2 = -537.6 There will be external Financing of $ -537.6 A0 = Assets that vary with sales S0= Sales S1= Sales for next year L0= Liability that vary with sales PM = Profit Margin b = Retention Ratio

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