The most recent financial statements for Assouad, Inc., are shown here: Assets,
ID: 2807957 • Letter: T
Question
The most recent financial statements for Assouad, Inc., are shown here:
Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 35 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are projected to increase by exactly 18 percent.
What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The most recent financial statements for Assouad, Inc., are shown here:
Explanation / Answer
Total assets would be=$13600*1.18=$16048
Current liabilites=$2700*1.18=$3186
Equity=$6640+Addition to retained earnings
=(6640+1632.176)=$8272.176
Total assets=debt+equity
Hence external financing needed=$16048-(3186+4260+8272.176)
=$329.82(Approx).
Sales(9500*1.18) $11210 Cost(6700*1.18) 7906 Taxable income $3304 Taxes@24% $792.96 Net income $2511.04 Less:dividend(2511.04*35%) $878.864 Addition to retained earnings $1632.176