The most recent financial statements for Kerch, Inc, are shown here (assuming no
ID: 2813544 • Letter: T
Question
The most recent financial statements for Kerch, Inc, are shown here (assuming no income taxes): Income Statement Sales 6,000 Balance Sheet $8,500Assets $19,500 Deb $6,200 Equity 13,300 Net income $2,500 $19,500 T $19,500 Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $10,115 What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) External financing neededExplanation / Answer
Growth rate in sales=(10115-8500)/8500=19%
Total assets would be=$19500*1.19=$23205
Total equity would be=$13300+Net income
=(13300+2975)
which is equal to
=$16275
Total assets=total debt+total equity
Hence external financing needed=(23205-16275-6200)
which is equal to
=$730.
Sales 10115 Costs(6000*1.19) $7140 Net income $2975