External financing needed
Not what you're looking for?
ARI has current sales of $50 mil. Sales are expected to grow to $75 mil. next year. ARI currently has accounts receivable of $10 mil, inventories of $15 mil and net fixed assets of $20 mil. These assets are expected to grow at the same rate as sales over the next year. Accounts payable are expected to increase from their current level of $10 mil to a new level of $13 mil. next year. ARI wants to increase its cash balance at the end of next year by $2 mil. over its current cash balances which average $4 mil. Net income next year is forecasted to be $10 mil. Next year, ARI plans to pay dividends of $1 million, up from $500,000 this year. ARI's marginal tax rate is 34%. How much external financing does ARI require next year. I desperately need help with this problem. Thank you.
Purchase this Solution
Solution Summary
The solution explains how to calculate the amount of external financing needed
Solution Preview
The external financing is calculated as
External Financing Needed = Increase in assets - increase in accounts payable - increase in retained earnings
The increase in ...
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.