Question

The most recent financial statements for Kerch, Inc., are shown here (assuming no income taxes): Income Statement Balance Sheet Sales $4,900 Assets $15,500 Debt $11,000 Costs 3,480 Equity 4,500 Net income $1,420 Total $15,500 Total $15,500 Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,965. What is the external financing needed

Answer 1

Answer:

1635.36

Explanation:

The growth rate in the sales=(5965-4900)/4900=21.7%

Sales =  5965

Less:costs(3480 x 1.217)   = $4235.16

Net income( 1420 x 1.217) = $1728.14

Total assets would be (15500 x 1.217)=$18863.5  

Total equity would be=4500 +$1728.14 = 6228.14  

Total assets=Total equity +Total liabilities  

Hence external financing needed=($18863.5 - 6228.14 - 11000) = 1635.36