Question

BBP, Inc., with sales of $600,000, has the following balance sheet:

BBP, Incorporated Balance Sheet as of 12/31/X0
Assets				Liabilities and Equity
Cash	$	30,000		Accounts payable	$	24,000
Accounts receivable		60,000		Accruals		42,000
Inventory		84,000		Notes payable		70,000
Current assets		174,000		Current liabilities		136,000
Fixed assets		215,000		Common stock		70,000
				Retained earnings		183,000
Total assets	$	389,000		Total liabilities and equity	$	389,000

The firm earns 13 percent on sales and distributes 25 percent of its earnings. Using the percent of sales, determine whether the firm will need external funds and forecast the new balance sheet for sales of $780,000 assuming that cash changes with sales and that the firm is not operating at capacity. Use newly issued short-term debt to cover any needs for additional finance. If the firm has excess funds, add them to cash. Round your answers to the nearest dollar. Enter your answers as positive values.

The firm -Select- will need external or will have excess funds of $_____

BBP, Incorporated Balance Sheet as of 12/31/X1
Assets				Liabilities and Equity
Cash	$			Accounts payable	$
Accounts receivable	$			Accruals	$
Inventory	$			Notes payable	$
Current assets	$			Current liabilities	$
Fixed assets	$			Common stock	$
				Retained earnings	$
Total assets	$			Total liabilities and equity	$

Would your answers be different if the firm distributed all of its earnings? Round your answers to the nearest dollar. Enter your answer as a positive value.

If management distributed all the firm's earnings, it -Select- will need external or will have excess funds of $_____

Answer 1

1.Additional Funds Needed = Total Assets * Sales Increase - Spontaneous Liabilities * Increase in sales - Addition to Retained Earnings

Additional Funds Needed = 389000 * 30% - 66000 * 30% - (780000 * 13% * (1 - 25%))

Additional Funds Needed = $20850

The firm -Select- will need external funds of $20850

Would your answers be different if the firm distributed all of its earnings? Round your answers to the nearest dollar. Enter your answer as a positive value.

Additional Funds Needed = Total Assets * Sales Increase - Spontaneous Liabilities * Increase in sales - Addition to Retained Earnings

Additional Funds Needed = 389000 * 30% - 66000 * 30% - (780000 * 13% * (1 - 100%))

Additional Funds Needed = $96900

If management distributed all the firm's earnings, it will need external funds of $96900

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