Question

The most recent financial statements for Fleury, Inc., follow. Sales for 2012 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?

Fleury Inc.
2011 Income Statement
Sales	743,000
Costs	578,000
Other expenses	15,200
Earning before interest and taxes	149,800
Interest paid	11,200
Taxable Income	138,600
Taxes	48,510
Net Income	90,090
Dividends	27,027
Additions to retained earnings	63,063

Fleury Inc.
Balance Sheet as of December 31, 2011
Assets	Amount	Liabilities	Amount
Current Assets		Current liabilities
Cash	20,240	Accounts payable	54,400
Accounts receivables	32,560	Notes payable	13,600
Inventory	69,520	Total	68,000
Total	122,320
Fixed Assets		Long term debt	126,000
Net plant and equipment	330,400
		Owner's equity
		Common stock and paid-in surplus	112,000
		Retained earnings	146,720
		Total	258,720
Total assets	452,720	Total liabilities and shareholder's equity	452,720

Answer 1