The firm is expecting a 20 precent increase in sales next year, and management is concerned about the company’s need for external funds.. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales. Using the percent-of-sales method, determine wheather the company has external financing needs, or a surplus of funds. (Hint: a profit margin and payout ratio must be found from the income statement.) Income Statement Sales……..$200,000 Expenses…..$158,000 ——- Earnings before interest and taxes $42,000 Interest…………..7,000 —— Earnings before taxes…35,000 Taxes……………….15,000 —— Earnings after taxes $20,000 Dividends $ 6,000 Balance Sheet Assets Liabilities and Stockholders’ Equity

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