Question:
Rodeo Supply Company is planning to increase its sales by 20% next year. The sales increase will require a total additional investment in receivables, inventory, and fixed assets of $750,000. Increases in liabilities such as accounts payable and other accruals will supply $175,000 of financing. Rodeo also expects total profits of $225,000 next year and will not pay any cash dividends. How much external financing is required to finance the sales increase?