BBP, Inc., with sales of $500,000, has the following balance sheet:
BBP, Incorporated Balance Sheet as of 12/31/X0
Assets Liabilities
Cash $ 25,000 Accounts Payable $ 15,000
Accounts Receivable $ 50,000 Accruals $ 20,000
Inventory $ 75,000 Notes Payable $ 0
Current Assets $150,000 Current Liabilities $ 85,000
Fixed Assets $200,000 Common Stock $100,000
Retained Earnings $165,000
Total Assets $350,000 Total Liabilities/Equity $350,000
The firm earns 15% on sales and distributes 25% of its earnings. Using the percent of sales method, forecast the new balance sheet for sales of $600,000 assuming that cash changes with sales and that the firm is not operating at capacity. Will the firm need external; funds? Would your answer be different if the firm distributed all of its earnings?
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