The Longbranch Western Wear Company has the following financial statements, which are representative of the company's historical average.

Income Statement
Sales	$210,000
Expenses	156,500
Earnings before interest and taxes	$53,500
Interest	3,000
Earnings before taxes	$50,500
Taxes	19,000
Earnings after taxes	$31,500
Dividends	$6,300

Balance Sheet
Assets		Liabilities and Stockholders' Equity
Cash	$4,000	Accounts payable	$9,000
Accounts receivable	20,000	Accrued wages	2,200
Inventory	25,000	Accrued taxes	9,800
Current assets	$49,000	Current liabilities	$21,000
Capital assets	80,000	Notes payable	8,000
		Long-term debt	20,000
		Common stock	30,000
		Retained earnings	50,000
Total assets	$129,000	Total liabilities and stockholders' equity	$129,000

Longbranch is expecting a 25 percent increase in sales next year, and management is concerned about the company,s need for external funds. The increase in sales is expected to be carried out without any expansion of capital assets; instead, it will be done through more efficient asset utilization in the existing stores. Of liabilities, only current liabilities vary directly with sales.

a. Using a percent-of-sales method, determine whether Longbranch Western Wear has external financing needs.

 

Answer rating: 100% (QA)

a Using the percentofsales method we can determine Longbranch Western Wears external financing needs ... View the full answer