Suppose that Road Industries currently has the balance sheet shown below, and that sales for the year just ended were $80 million. The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?
A) $0
B) $122,500
C) $112,500
D) $287,500

Question

Suppose that Road Industries currently has the balance sheet shown below, and that sales for the year just ended were $80 million. The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? 
A) $0 
B) $122,500 
C) $112,500 
D) $287,500

Quizplus · Accepted Answer

The Answer of Suppose that Road Industries currently has the balance sheet shown below, and that sales for the year just ended were $80 million. The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? 
A) $0 
B) $122,500 
C) $112,500 
D) $287,500

Suppose That Road Industries Currently Has the Balance Sheet Shown