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"Masters In Business Administration with Major in Finance"
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The income statement for the next year based on 10% increase in sales next year is projected as follows:
The balance sheet is also projected below and there is a negative external finance required (which means the compnay can reduce debt or equity)
304290
Please explain how the external finance was determined
Felicia & Fred Felicia & Fred Balance Sheets Statement of Cash Flows December 31, 2015 and 2014 For the Period Ended December 31, 2015 000s Cash Flows from Operating Activities: 000s 000s Net Income 52,500 Assets 2015 2014 Adjustments to reconcile net income to net cash provided by operating activities Cash 12,000 11,400 Depreciation Expense 55,700 Accounts Receivable 4,700 4,600 Increase in accounts receivable (100) Inventory 24,200 13,000 Increase in inventory (11,200) Total Current Assets 40,900 29,000 Decrease in salaries payable (4,200) Increase in interest payable 3,000 Land 50,000 40,000 Decrease in taxes payable (11,200) Building & Equipment 600,000 600,000 Increase in Short Term notes Payable 24,000 Less: Accumulated Depreciation - Building& Equipment (375,700) (320,000) Increase in accounts payable 2,200 Total Long Term Assets 274,300 320,000 Net Cash Flow from Operating Activities 110,700 Total Assets 315,200 349,000 Cash Flows from Investing Activities: Liabilities and Stockholders' Equity Cash paid to purchase land (10,000) Net Cash Flow from Investing Activities (10,000) Accounts Payable 9,200 7,000 Salaries Payable 0 4,200 Cash Flows From Financing Activities: Interest Payable 3,000 0 Short Term Notes Payable 24,000 0 Cash paid for mortgage (90,100) Taxes Payable 0 11,200 Cash paid for dividends (10,000) Total Current Liabilities 36,200 22,400 Net Cash Flow from Financing Activities (100,100) Mortgate Payable 109,900 200,000 Net Increase in Cash 600 Total Long Term Liabilities 109,900 200,000 Plus: Cash Balance at December 31, 2013 11,400 Cash Balance at December 31, 2014 12,000 Common Stock 120,000 120,000 Retained Earnings 49,100 6,600 Total Stockholders' Equity 169,100 126,600 Total Liabilities and Stockholders' Equity 315,200 349,000 Felicia & Fred Income Statements For the Periods Ended December 31, 2015 and 2014 000s 000s 2015 2014 Revenue: 975,000 950,000 Less: Cost of Goods Sold (723,600) (749,000) Less: Depreciation Expense (55,700) (52,000) Gross Margin 195,700 149,000 Selling, General & Administrative Expenses (58,200) (64,000) Income Before Interest & Taxes 137,500 85,000 Interest Expense (15,000) (12,000) Income Before Taxes 122,500 73,000 Income Taxes (70,000) (60,000) Net Income 52,500 13,000Explanation / Answer
External finane required = Inccrease in total assets - Increase in current liabilities - Retained earnings for the next year
Increase in total assets = $304,290 - $315,200 = -$10,910
Increase in current liabilities = $39,820 - $36,200 = $3,620
Retained earnings for next year = $54,010 - $49,100 = $4,910
External finance required = -$10,910 - $3,620 - $4,910 = -$19,440
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