The most recent financial statements for Crosby, Inc., follow. Sales for 2021 are projected to grow...

 

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The most recent financial statements for Crosby, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 20 percent growth rate in sales? CROSBY, INC. 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (21%) Net income Dividends Addition to retained earnings $27,475 56,265 $686,530 554,420 14,020 $118,090 12,090 $106,000 22,260 $ 83,740 Current assets Cash Accounts receivable Inventory Total Fixed assets Assets Total assets CROSBY, INC. Balance Sheet as of December 31, 2020 $ 20,940 31,970 71,320 $124,230 Net plant and equipment $341,980 $466,210 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity $ 53,790 13,215 $ 67,005 $127,500 Common stock and paid-in surplus $105,000 Retained earnings 166,705 Total Total liabilities and owners' equity $271,705 $466,210 The most recent financial statements for Crosby, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 20 percent growth rate in sales? CROSBY, INC. 2020 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (21%) Net income Dividends Addition to retained earnings $27,475 56,265 $686,530 554,420 14,020 $118,090 12,090 $106,000 22,260 $ 83,740 Current assets Cash Accounts receivable Inventory Total Fixed assets Assets Total assets CROSBY, INC. Balance Sheet as of December 31, 2020 $ 20,940 31,970 71,320 $124,230 Net plant and equipment $341,980 $466,210 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity $ 53,790 13,215 $ 67,005 $127,500 Common stock and paid-in surplus $105,000 Retained earnings 166,705 Total Total liabilities and owners' equity $271,705 $466,210

Answer rating: 100% (QA)

To determine the external financing needed by Crosby Inc to support a 20 percent growth rate in sales lets first calculate the projected increase in sales costs and other expenses that vary with sales ... View the full answer