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

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

Income Statement
Sales	$5,683
Costs	$4,258

Balance Sheet
Assets	$16,387	Debt	$8,882
		Equity	?

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $7,885.

What is the external financing needed?

Solutions

Expert Solution

Total assets=Total liabilities+Total equity

Beginning equity=16387-8882

=$7505

Growth rate in sales=(7885-5683)/5683

=38.7471406%(Approx)

Sales	7885
Costs(4258*1.387471406)	5907.85
Net income	1977.15

Total assets would be=16,387*1.387471406

=$22736.49(Approx)

Total equity would be=Beginning equity+Net income

=7505+1977.15=$9482.15

Total assets=Total liabilities+Total equity

Hence external financing needed=22736.49-9482.15-8882

=$4372.34(Approx)

jeff jeffy answered 2 years ago

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