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The most recent financial statements for Zoso, Inc
The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes):
Income Statement Balance Sheet
Sales Assets $15,000 Debt $10,900
$4,900 Equity 4100
Costs 3,430 Total $15,000 Total $15,000
Net income $1,470
Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,969. What is the external financing needed? (Do not round your intermediate calculations.)
Expert Solution
Computation of the external financing needed:-
% Increase in sales = ($5,969 - $4,900) / $4,900
= $1,069 / $4,900
= 21.82%
Net income = Sales - Cost
= $5,969 - ($3,430 * (1+21.82%))
= $5,969 - $4,178.30
= $1,790.70
Total assets = Total assets * (1 + % increase in sales)
= $15,000 * (1 + 21.82%)
= $18,272.45
Total equity = $4,100 + $1,790.70
= $5,890.70
External financing needed = $18,272.45 - $5,890.70 - $10,900
= $1,481.75
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