Suppose That Gyp Sum Industries Currently Has the Balance Sheet

question 91

Multiple Choice

Suppose that Gyp Sum Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $20 million. The firm also has a profit margin of 22 percent, a retention ratio of 42 percent, and expects sales of $30 million next year. If all assets and current liabilities are expected to grow with sales, how much additional funds will Gyp Sum need from external sources to fund the expected growth?
$$\begin{array} { l r r l r } \text { Assets } & &{ \text { Liabilities ard Equity } } \\\text { Current Assets } & 2,000,000 & \text { Current Liabilities } & \$ 1,500,000 \\\text { Fixed Assets } & 14,000,000 & \text { Long-tem Debt } & 1,500,000 \\& & \text { Equity } & 13,000,000 \\\text { Total Assets } & \$ 16,000,000 & \text { Total Liabilities and Equity } & \$ 16,000,000\end{array}$$

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