730 145 220 $ 405 Hungry Kids 2012 Balance Sheet 890 3,840 7,600 $ 9,100 $ 9,100

Question

730  

145  

220  

$

405  

Hungry Kids
2012 Balance Sheet

890    

3,840    

7,600    

$

9,100    

$

9,100    

     
Hungry Kids is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5 percent. What is the external financing need?

Hungry Kids
2012 Income Statement     Net sales $ 5,600     Cost of goods sold 4,100     Depreciation

730  

  Earnings before interest and taxes $ 770     Interest paid

145  

  Taxable Income $ 625     Taxes

220  

  Net income

$

405  

     Dividends $ 84        Addition to retained earnings $ 321  

Explanation / Answer

$43

Pro forma income statement Sales $5,880 Costs 0 Taxes 0 Net income $425 Pro forma balance sheet Current assets $1,575 Fixed assets 7980 Total $9,555 Current liabilities $1,575 Long-term debt 1660 Equity 6277.05 Total $9,512 External funds needed (EFN) $43

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