Answer: $268.10
Explanation:
Assets and Costs are proportional to sales meaning they grow at the same rate.
Sales rate of growth is,
= (9,996-8,400)/8400
=19%
Assuming that costs grew by 19% then Costs next year will be ,
= 6,390 * (1 + 0.19)
= $7,604.1
Meaning that Net Income is,
= Sales - Costs.
= 9,996 - 7,604.1
= $2,391.9
Retained earnings or net income is added to Equity
Total Equity= 8,000 + 2391.9
Total Equity =$10,391.90
Total Assets also grew by 19% as per the question so,
= 14,000* (1 + 0.19)
=$16,660
Going by the Accounting Equation,
Total assets = Total equity + Total debt
Hence external financing needed
16,660 = 10391.9 + 6000 + Additional funding
Additional funding = 16,660 - 10391.9 - 6,000
Additional funding = $268.10
The external financing needed Additional funding is $268.10
The Assets and also Costs are proportional to sales meaning they grow at the same rate.
Then the Sales rate of growth is,
After that = (9,996-8,400)/8400
Then it is =19%
Now we are Assuming that costs grew by 19% then Costs next year will be ,
Then = 6,390 * (1 + 0.19)
After that = $7,604.1
Then Meaning that Net Income is,
Then = Sales - Costs.
After that = 9,996 - 7,604.1
Now = $2,391.9
Then we Retained earnings or net income is added to Equity
The Total Equity is = 8,000 + 2391.9
The Total Equity is =$10,391.90
The Total Assets also grew by 19% as per the question so,
That is = 14,000* (1 + 0.19)
Now =$16,660
Now we Going to the Accounting Equation,
Formula of Total assets is = Total equity + Total debt
Hence proof that external financing needed
16,660 is = 10391.9 + 6000 + Additional funding
Then Additional funding is = 16,660 - 10391.9 - 6,000
Therefore, Additional funding is = $268.10
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