The most recent financial statements for Kerch, Inc., are shown here (assuming n
ID: 2817161 • Letter: T
Question
The most recent financial statements for Kerch, Inc., are shown here (assuming no income taxes): Income Statement Balance Sheet Sales $ 7,200 Assets $ 21,700 Debt $ 9,100 Costs 4,730 Equity 12,600 Net income $ 2,470 Total $ 21,700 Total $ 21,700 Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $8,424. What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Growth rate in sales=(8424-7200)/7200=17%
Total assets would be=$21700*117%=$25389
Total equity would be=$12600+$2889.90
=$15489.90
Total assets=Total equity +Total liabilities
Hence external financing needed=($25389-$15489.90-$9100)
which is equal to
=$799.10
Sales 8424 Less:costs(4730*1.17) $5534.10 Net income $2889.90