Purchase Solution

External financing needed

Not what you're looking for?

Ask Custom Question

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.