Getrag expects its sales to increase 20% next year from its current level of $4.

Question

Getrag expects its sales to increase 20% next year from its current level of $4.7 million. Getrag has current assests of $660,000, net fixed assests of $1.5 million, and current liabilities of $462,000. All assets are expected to grow proportionately with sales. If Getrag has a net profit margin of 10%,
what additional financing will be needed to support the increase in sales? Getrad does not pay dividends.
a. $339,600
b. $283,200
c. No financing needed, surplus of $224,400
d. No financing needed, surplus of $524,400

Explanation / Answer

c. No financing needed, surplus of $224,400

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