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External Financing: Percentage Sales Method

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Given the compressed version of balance sheet and income statement, estimate the amount of external financing needed to increase sales by 20% next year (use percentage of sales method).

(Dividend payout is 50%)
Balance Sheet (End of the Year)
Assets $2,000 Debt $1000
Equity $1000
Total $2000 $2000
Income Statement
Sales $1000
Costs 800
Net Income 200.

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Solution Summary

Percentage Sales Method is expressed in the solution.

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External financing requirement = [(total assets/sales) x change in sales] - ...

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