The most recent financial statements for Watchtower, Inc. are shown here (assuming no income taxes): Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,002. What is the amount of the external financing need?

Question

The most recent financial statements for Watchtower, Inc. are shown here (assuming no income taxes):  Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,002. What is the amount of the external financing need?

Quizplus · Accepted Answer

Sales increase = ($5,002 - $4,100)/$4,100 = 0.22 External financing need = $11,114 - $10,911 = $203

The Most Recent Financial Statements for Watchtower, Inc