Question

Corn Dog Corp expects net income next year to be $609,000. Inventory and accounts receivable will have to be increased by $302,000 to accommodate this sales level. Corn Dog will pay dividends of $403,000. How much external financing will Corn Dog need assuming no organically generated increase in liabilities

Answer 1

$96,000

Step-by-step explanation:

Increase in current assets = $302,000

Retained earnings = Net income - Dividends

Retained earnings = $609,000 - $403,000

Retained earnings = $206,000

External financing needed = Increase in current assets - Retained earnings

External financing needed = $302,000 - $206,000

External financing needed = $96,000