Question

Based on​ Jim's expectation of 9.9% sales growth and payout ratio of 89.86% of net income next​ year, Jim developed the pro forma financial statements given below. What is the amount of net new financing needed for​ Jim's Espresso? 

Income Statement Balance Sheet      
Sales   $222,405 Assets      
Costs Except Depreciation   (109,120) Cash and Equivalents   $16,375  
EBITDA   $113,285    Accounts Receivable   2,308  
Depreciation   (6,616) Inventories   4,484  
EBIT   $106,669 Total Current Assets   $23,167  
Interest Expense (net)   (429) Property, Plant, and Equipment   11,034  
Pretax Income   $106,240 Total Assets   $34,201  
Income Tax   (37,184)              
Net Income   $69,056 Liabilities and Equity      
Accounts Payable   $1,605  
Debt   3,950  
Total Liabilities   $5,555  
Stockholders' Equity   $32,712  
Total Liabilities and Equity   $38,267

Will it be excess or required financing?

How much financing?

Answer 1

Simply to calculate excess fund/required financing formula is Excess Fund = Total Assets - Total Liabilites, if this is negative than it is required financing

Clearly, liabillities are greater than asset. Hence, it is required financing.

Require Financing = Total Liabilities - Total Asset = $38,267 - $34,201  

= $4066

Hence the total new required financing is $4066

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