Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, how much will spontaneous liabilities increase with the increase in sales?

Assets Liabilities and Equity
Current Assets $ 2,000,000 Current Liabilities $ 2,500,000
Fixed Assets 8,000,000 Long-term Debt 1,500,000
Equity 6,000,000
Total Assets $ 10,000,000 Total Liabilities and Equity $ 10,000,000

(2.5/15) × 5 = 0.8333m.