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The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 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. CROSBY, INCORPORATED 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 $ 25,640 35,100 71,780 $ 132,520 Fixed assets Net plant and equipment $ 224.000 767,000 623,000 31,000 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 113,000 15,600 $ 97,400 23 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings $ 63,000 18,800 $ 81,800 $ 115.000 $ 114,000 45.720 Total $ 159,720 $ 356,520 Total liabilities and owners' equity $ 356,520 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 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. CROSBY, INCORPORATED 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 $ 25,640 35,100 71,780 $ 132,520 Fixed assets Net plant and equipment $ 224.000 767,000 623,000 31,000 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 113,000 15,600 $ 97,400 23 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings $ 63,000 18,800 $ 81,800 $ 115.000 $ 114,000 45.720 Total $ 159,720 $ 356,520 Total liabilities and owners' equity $ 356,520 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter6: Accounting For Financial Management
Section: Chapter Questions
Problem 12P
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The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 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. Sales Costs Other expenses CROSBY, INCORPORATED 2020 Income Statement Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 Fixed assets Net plant and equipment $ 224,000 EFN $ 25,640 35,100 71,780 $ 132,520 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 767,000 623,000 31,000 $ 356,520 $ 113,000 15,600 $ 97,400 23.376 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total $ 114,000 45,720 $ 159,720 Total liabilities and owners' equity $356,520 $ 63,000 18,800 $ 81,800 $ 115,000 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Answer is complete but not entirely correct. s 8.125 X
Transcribed Image Text:The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 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. Sales Costs Other expenses CROSBY, INCORPORATED 2020 Income Statement Earnings before interest and taxes Interest paid Taxable income Taxes (24%) Net income Dividends Addition to retained earnings Current assets Cash Accounts receivable Inventory Total Total assets $ 23,440 50,584 Fixed assets Net plant and equipment $ 224,000 EFN $ 25,640 35,100 71,780 $ 132,520 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets $ 767,000 623,000 31,000 $ 356,520 $ 113,000 15,600 $ 97,400 23.376 $ 74,024 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total $ 114,000 45,720 $ 159,720 Total liabilities and owners' equity $356,520 $ 63,000 18,800 $ 81,800 $ 115,000 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Answer is complete but not entirely correct. s 8.125 X
Expert Solution
Step 1

In business, borrowing money from banks or investors is referred to as external finance. Since it originates from an outside source rather than the company itself, it is effectively external. External financing is significant when it comes to a company's overall financial situation because it can aid in business expansion.

The amount of outside funding a business needs to continue to be profitable is known as the external financing needed, or EFN. Since it shows the precise amount that the business needs to borrow from lenders and other external sources, EFN is crucial to comprehend.

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