The following summarized financial statements relate to Jasmin Ltd for the year ended 31 October 2018
Income statement                                    Sh.’000’
Sales                                                        450,000
Profit before tax                                        81,000
Less: taxation                                            27,000
Profit after tax                                           54,000
Dividend                                                   13,500
Retained earnings                                     40,500

Balance sheet
                                                                  Sh.’000’              Sh.’000’
Non-current assets                                                            285,000
Current assets                                             219,000
Less: current liabilities                             (154,500)
Working capital                                                                   64,500
Net assets                                                                          349,500

Financed by:
Ordinary share capital                                                        75,000
Reserves                                                                             135,000
Shareholder equity                                                           210,000
Longterm liability
Bank loan                                                                            139,500
Total equity and long term liability                                 349,500

The company is in the process of preparing a financial budget for the year ending 31 October 2019.

Additional information:

1)      From past experience, the management of the company have determined that for each sh.1 of additional sales, a total investment of sh.1.50 in fixed assets, stock and debtors would be required.

2)      The management have also determined that, for each sh.1.00 of additional sales, the company would require trade credit amounting to sh.0.60

3)      The company has maintained a constant dividend payout ratio.

4)      Any requirements for internal funds are to be met from the retained earnings for the year
ending 31 October 2019.

Required

1. External finance (if any) required in year 2019 assuming that the sales for the year increase by 20%.  (7 Marks)

2. Expected maximum growth in sales in year 2019 assuming that the company only utilizes internal funds. 

Answer rating: 100% (QA)

1 External Finance if any required in year 2019 assuming that the sales for the year increase by 20 The external finance required is Sh80060 and the d... View the full answer