I think the key is the fact that you're working with

**net **assets, which is shorthand for "assets

**not **financed with debt".

Any asset not financed with debt must be funded either with fresh equity, or with retained earnings (which is just a special case of fresh equity, anyway).

Thus you have here an expectation of

**net **assets increasing by 250K. Doesn't matter what

**total **asset growth there'll be--it's sufficient that we know that

__all but 250K__ of the asset growth will be supported by an increase in debt.

That leaves us looking for 250K to come from earnings or new equity. Now we see that the earnings expectation is only 90K. Given that there's only 100K in the kitty at the start of the year, the shortfall becomes obvious.

Morgaine is right... Philip Morris' attitude is a bit premature. His sales will tank once his customers realize that everything in his shop smells of cigarette smoke

Cheers, all