The following tables summarizes the 2019 income statement and end-year balance sheet of Drakes Bowling...
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Finance
The following tables summarizes the 2019 income statement and end-year balance sheet of Drakes Bowling Alleys. Drakes financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year.
INCOME STATEMENT, 2019
(Figures in $ thousands)
Sales
$
1,240
(40% of average assets)a
Costs
930
(75% of sales)
Interest
28
(5% of debt at start of year)b
Pretax profit
$
282
Tax
113
(40% of pretax profit)
Net income
$
169
a Assets at the end of 2018 were $3,000,000.
b Debt at the end of 2018 was $560,000.
BALANCE SHEET, YEAR-END
(Figures in $ thousands)
Assets
$
3,200
Debt
$
560
Equity
2,640
Total
$
3,200
$
3,200
If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020? (Do not round your intermediate calculations. Enter your answer in thousands.)
If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)
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