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A-Consider the following financial statements (in millions
Income Statement (2016)Balance Sheet (2016)Credit Sales1.000Cash160Accounts Payable300Cost of Goods Sold(800)Accounts Receivable440Short-Term Debt100Taxable Income200Inventory600Long-Term Debt800Taxes (34%)68Fixed Assets1.800Common Stock800Net Income132Retained Earnings1.000Total3.000Total3.000Dividend44Retained Earnings88Main assumptions:Sales are expected to increase by 25% in 2017."Cost of goods sold" is a fraction of sales in the income statement. All other items in the incomestatements are independent of sales.Each current asset and accounts payable are fractions of sales in the balance sheet. All other itemsin the balance sheet are independent of sales and will stay unchanged.If there is a need for external funding:o raise funds through short-term debt first, but current ratio (current assets/current liabilities)must be equal to 3.o raise the remaining funds through 50% long-term debt and 50% equity offering (commonstock).
