Question

The most recent financial statements for Williamson, Inc., are shown here (assuming no income taxes):

Income Statement				Balance Sheet
Sales	$	9,300		Assets	$	20,000		Debt	$	8,000
Costs		7,330						Equity		12,000
Net income	$	1,970		Total	$	20,000		Total	$	20,000

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $10,788.

What is the external financing needed? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Answer 1

Growth rate in sales=(10788-9300)/9300=16%

Sales	10788
Costs(7330*1.16)	8502.8
Net income	2285.2

Total assets would be=20,000*1.16=23200

Total equity would be=12000+Net income

=12000+2285.2=14285.2

Total assets=Total equity+Total debt

Hence external financing needed=23200-(14285.2+8000)

=$915(Approx).