In: Finance
The most recent financial statements for GPS, Inc., are shown here:
Income Statement | |
Sales | $23,852 |
Costs | $11,902 |
Taxable Income | ? |
Taxes (40%) | ? |
Net Income | ? |
Balance Sheet | |||
Assets | $56,455 | Debt | $18,576 |
Equity | ? |
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,980 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $29,412.
What is the external financing needed? (Negative amount should be indicated by a minus sign.)
(Omit the "$" sign and commas in your response. Enter your answer rounded to the nearest whole dollar amount. For example, $1,200.456 should be entered as 1200.)
Sales | 23852 |
Costs | 11902 |
Taxable income | $11950 |
Taxes(40%)(11950*40%) | 4780 |
Net income | $7170 |
Total assets=Total liabilities+Total equity
Hence equity=(56,455-18,576)=$37879
Growth rate in sales=(29412-23852)/23852
=23.3104142%(Approx)
Dividend payout ratio=Dividend payout/Net income
=1980/7170
=0.276150628
Sales | 29,412 |
Costs(11902*1.233104142) | 14676.41 |
Taxable income | 14735.59 |
Taxes(14735.59*40%) | 5894.24 |
Net income | 8841.35 |
Less:Dividends(8841.35*0.276150628) | 2441.54 |
Addition to retained earnings | 6399.81 |
Total assets would be=56,455*1.233104142
=$69614.89
Total equity would be=37879+Addition to retained earnings
=37879+6399.81=$44278.81
Total assets=Total liabilities+Total equity
Hence external financing needed=69614.89-44278.81-18576
=6760(Approx)