Calculate the external financing needed given the following information: current sales = $1,000; current sales capacity = 90%; current fixed assets = $1,800; projected future sales = $1,250.

Question

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The external financing needed can be calculated by determining the additional fixed assets required to support the projected future sales, given the current sales capacity. The current sales capacity is 90%, meaning the current fixed assets of $1,800 support sales up to $1,000 / 0.9 = $1,111.11. To support projected future sales of $1,250, the company needs fixed assets of $1,250 / $1,111.11 * $1,800 = $2,025 in total. Since the company already has $1,800 in fixed assets, the additional external financing needed is $2,025 - $1,800 = $225.

Calculate the External Financing Needed Given the Following Information: Current