Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Suppose that current assets, costs, and accounts payable maintain a constant ratio to sales. The firm retains 40% of earnings. If the firm is producing at only 90% capacity, what is the total external financing needed if sales increase 25%?

Stone Roses Co.
Balance Sheet
Cash
Inventory
Fixed assets
Total assets
$50 Accounts payable
$150
Notes payable
$600
Long-term debt
Taxes (34%)
Net income
Equity
$800 Total liabilities &
equity
Stone Roses Co. Income statement
Sales
Costs
EBT
$100
100
350
250
$800
$800
600
$200
68
$132
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Transcribed Image Text:Stone Roses Co. Balance Sheet Cash Inventory Fixed assets Total assets $50 Accounts payable $150 Notes payable $600 Long-term debt Taxes (34%) Net income Equity $800 Total liabilities & equity Stone Roses Co. Income statement Sales Costs EBT $100 100 350 250 $800 $800 600 $200 68 $132
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