Answer:
$2,260
Explanation:
The computation is shown below:
Present sales revenue $42,700
Expected sales revenue ($42,700 × 114 ÷ 100) $48,678
Current profit margin ($5,500 ÷ $42,700 × 100) 12.88%
Payout Ratio:
Dividends (a) $1,925
Net Income (b) $5,500
Payout Ratio (a ÷ b × 100) 35%
Retention Ratio (100% - 35%) 65%
due to 14% rise in sales Increase in retained earnings ($48,678 × 12.88 ÷ 100 × 65 ÷ 100) $4,075.32
due to 14% rise in sales, Increase in assets ([$48,678 - $42,700] × $48,900 ÷ $42,700) $6,846
due to 14% rise in sales, Increase in liabilities ([$48,678 - $42,700] × $3,650 ÷ $42,700) $511
when sales rise by 14% External Financing Needed ($6,846 - $4,075.32 - $511) $2,260
