Question

The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 35 percent Increase in sales next year, and management is concerned about the company's need for external funds. The Increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilitles, only current liabilities vary directly with sales. Income Statement Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends $200.000 155.000 $ 44,200 2.100 $26. 100 16.100 $ 20,000 $ 7,000 Assets Cash Accounts receivable Inventory Current assets Fixed assets Balance Sheet Liabilities and Stockholders' Equity $ 5,000 Accounts payable 35.000 Accrued wages 60.000 ccrued saxes $ 100,000 Current liabilities 91.000 Notes payable Long-term debt Common stock Retained earnings $191,000 Total liabilities and stockholders' equity $ 20,000 1.750 4.250 $ 26,000 B. 100 20.500 115,000 21.400 $191,000 Total assets Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds. (Hint: A profit margin and payout ratio must be found from the Income statement.) (Do not round Intermediate calculations.) The firm

Answer 1

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| 0 = = = = = 3 g W ? v L 1 05:23 E ENG 23-01-202012 fix FW FX FY FL GA GB GC GD GE GF GG GH C GD792 - X FUFV 769 770 771 772 773 1 PROFIT MARGIN = 774 775 20000/200000 10.00% 7000/20000 35.00% 2 DIVIDEND PAYOUT = 776 778 779 780 3 NEXT YEAR SALES = NET INCOME = LESS: DIVIDEND (35%) = RETAINED EARNINGS 270000 [200000*1.35] 27000 9450 17550 781 782 783 784 785 786 787 788 789 790 791 792 YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFE LP, IP, MRP, INFLATION WARR...

? v L 1 05:23 ENG 23-01-202012 GD745 FU FY FZ GA GB GC GD GE GF GG GH CA 745 746 747 200000 X fix FV FW FX PERCENTAGE OF SALES METHOD SALES ASSETS CURRENT YR CURRENT ASSETS AMOUNT CASH 5000 ACCOUNTS RECEIVABLE 35000 INVENTORY 60000 TOTAL 100000 NEXT YR 748 % 750 751 2.50% 17.50% 30.00% 50.00% AMOUNT 20000 1750 4250 26000 8100 20500 10.00% 0.8750% 2.1250% 0 752 270000 NEXT YR LIABILITIES & OWNERS' EQUITY CURRENT LIABAILITIES 6750 ACCOUNTS PAYABLE 47250 ACCURED EXPENSES 81000 ACCURED TAXES 135000 TOTAL NOTES PAYABLE LONG TERM DEBT 91000 COMMON STOCK RETAINED EARNINGS TOTAL 226000 TOTAL LIABILITIES & EQUITY 27000 2362.5 5737.5 35100 8100 20500 753 754 755 756 757 0 FIXED ASSETS NET PLANT & EQUIPMENT 91000 0 [21400+ 17550) 115000 21400 136400 191000 0 115000 0 38950 153950 217650 758 759 TOTAL ASSETS 191000 0 760 761 762 NOTE 763 NOTE EACH FIGURE IS DIVIDED BY SALES OF 200000 FOR EXAMPLE: CASH = 2.50% (5000/200000] ZERO INDICATES IT DOES NOT DEPEND ON SALES 764 765 766 767 ANS 768 EFN = THE FIRM HAS EFN OF = 8350 [226000 - 217650] YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFE LP, IP, MRP, INFLATION WARR... :