External financing is required to finance the sales increase
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Rodeo Supply Company is planning to increase its sales by 20% next year. The sales increase will require a total additional investment in receivables, inventory, and fixed assets of $750,000. Increases in liabilities such as accounts payable and other accruals will supply $175,000 of financing. Rodeo also expects total profits of $225,000 next year and will not pay any cash dividends. How much external financing is required to finance the sales increase?
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Solution Summary
This solution discusses the amount of external financing required to finance a 20% sales increase.
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Additional Funds Needed = Increase in Assets - Increase in Spontaneous Liabilities - Retained earnings
Here Total Assets are assumed to ...
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