14. Use the below information to answer the following question. Income Statement

Question

14. Use the below information to answer the following question.

Income Statement

For the Year

  Sales

$42,700

  Cost of goods sold

29,250

  Depreciation

3,750

  Earnings before interest and taxes

$ 9,700

  Interest paid

1,360

  Taxable income

$ 8,340

  Taxes

2,840

  Net income

$ 5,500

Dividends $1,925

Balance Sheet

End-of-Year

  Cash

$ 1,320

  Accounts receivable

3,780

  Inventory

10,200

  Total current assets

$15,300

  Net fixed assets

33,600

  Total assets

$48,900

  Accounts payable

$ 3,650

  Long-term debt

18,100

  Common stock ($1 par value)

15,000

  Retained earnings

12,150

  Total Liab. & Equity

$48,900

Assume net working capital and all of this firm’s costs increase directly with sales. Also assume the tax rate and the dividend payout ratios are constant. The firm is currently operating at full capacity. What is the external financing need if sales increase by 4 percent?

A. –$1,908

B. –$804

C. –$397

D. $1,201

E. $1,344

14. Use the below information to answer the following question.

Explanation / Answer

14. Use the below information to answer the following question. Income Statement

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