Reference no: EM133115294
Zed Company has been operation below capacity in the last year due to low demand attributed to economic recession. The management has estimated that the sales are likely to grow by 20% in the next year. Costs, current assets, current liabilities vary spontaneously with sales. Tax rates and dividend payout will remain constant.
Zed Company
Financial statements
Year 2018
Income statement Statement of financial position ASSETS LIABILITIES & CAPITAL sh. '000' sh. '000' sh. '000'
Sales 4,000 Current assets 1000 Current liabilities 600
Costs 3,000 Net fixed assets 2,000 Long-term debt 900
Taxable income 1,000 Ordinary share
capital 1,500
Taxes (30%) 300
Net income 700 Total assets 3,000 Total 3,000
Dividends 105
Retained earnings 595
Required:
Determine the External Financing Needed using the percentage of sales method.
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