Assets, accounts payable and costs are proportional to sales. Debt and equity are not. The sales of Douglass Enterprises are expected to increase by 14% next year. The ﬁrm is currently
Producing at full capacity. Management wants to maintain a constant debt-equity ratio and a
Constant dividend payout ratio. What is the external ﬁnancing need?

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 Assets, accounts payable and costs are proportional to sales. Debt and equity are not. The sales of Douglass Enterprises are expected to increase by 14% next year. The ﬁrm is currently
Producing at full capacity. Management wants to maintain a constant debt-equity ratio and a
Constant dividend payout ratio. What is the external ﬁnancing need?

Assets, Accounts Payable and Costs Are Proportional to Sales