If all assets and current liabilities are expected to
Course:- Accounting Basics
Reference No.:- EM13601533

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Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year.

Assets Liabilities and Equity

  • Current assets $ 2,000,000 Current liabilities $ 1,500,000
  • Fixed assets 4,000,000 Long-term debt 1,500,000
  • Equity 3,000,000

Total assets $ 6,000,000 Total liabilities and equity $ 6,000,000

If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth?

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