Please see the attached problem.
EFN: The most recent financial statements for Martin, Inc., are shown here:
INCOME STATEMENT BALANCE SHEET
Sales $19,200 Assets $93,000 Debt $20,400
Costs $15550 Equity $72,600
Taxable income $ 3,650 Total $93,000 Total $93,000
Taxes (34%) 1,241
Net income $2,409
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $963.60 was paid, and Martin wishes to maintain a constant payout ratio. Next year's sales are projected to be $23,040. What is the external financing needed?
See the attached spreadsheet. I've worked step by step to try to explain how this works.
Basically, you'll see that the EFN formula is as follows:
EFN=(Expected Total Assets)-(Expected Total Liabilities)
Expected total assets are easy to calculate as they are said to be a constant percentage of sales.
Last year, sales were $19,200 and assets ...
External funds needed by a firm are calculated based upon the given financials (income statement and balance sheet).