Question

The most recent financial statements for Fleury Inc., follow. Sales for 2015 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase spontaneously with sales.

FLEURY, INC. 2014 Income Statement
Sales				$	757,000
Costs					592,000
Other expenses					13,000
Earnings before interest and taxes				$	152,000
Interest paid					15,000
Taxable income				$	137,000
Taxes (20%)					27,400
Net income				$	109,600
Dividends	$	21,920
Addition to retained earnings		87,680

FLEURY, INC. Balance Sheet as of December 31, 2014
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	21,640		Accounts payable	$	55,800
Accounts receivable		33,960		Notes payable		15,000
Inventory		70,920		Total	$	70,800
Total	$	126,520		Long-term debt	$	140,000
Fixed assets				Owners’ equity
Net plant and equipment	$	490,000		Common stock and paid-in surplus	$	126,000
				Retained earnings		279,720
				Total	$	405,720
Total assets	$	616,520		Total liabilities and owners’ equity	$	616,520

If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 25 percent growth rate in sales?

WHAT IS EFN?

Answer 1

AMOUNT 2 $ 69,750 $ 15,000 E15 - X V A B Income Statement Sales $ 3 Less: Costs $ 4. Less: Other expenses $ |EBIT $ 6 Less: Interest $ 7 EBT $ 8 Less: Tax @ 20% $ Net income $ 10 Less: Dividends $ Retained Earnings $ 5 fx =F13-H13 C D E F ASSETS AMOUNT LIABILITIES & SHAREHOLDER'S EQUITY 946,250 CURRENT ASSETS: LIABILITIES: 740,000 Cash $ 27,050 Account Payable 16,250 Account Receivable $ 42,450 Notes Payable 190,000 Inventory $ 88,650 15,000 Total 175,000 Total $ 158,150 Long Term Debt 35,000 FIXED ASSETS: 140,000 Net plant and equipment $ 612,500 SHAREHOLDER'S EQUITY 28,000 Common Shareholder's Equity 112,000 Accumulated Retained Earnings Total TOTAL OF ASSETS $ 770,650 TOTAL OF LIABILITES & SAHREHOLDER'S EQUITY $ 84,750 $ 140,000 9 11 $ 126,000 $ 391,720 $ 517,720 $ 742,470 15 External financing is needed) $ 28,180

*Please rate thumbs up