Homework Answers
Net Profit Margin = Net Profit / Sales
= $ 5,500 / $ 42,700
= 12.88056206%
Dividend Payout Ratio = Dividends / Net profit
= $ 1925 / $ 5500
= 0.35
Increase in Assets = Total Assets / Current Sales * Change in Sales
= 48,900 / 42,700* (42,700*4%)
= $ 1,956
Increase in Current Liabilities = Current Liabilities / Current Sales * Change in Sales
= $ 3,650/ 42,700 * ( $ 42,700 * 4%)
= $ 146
Earnings Retained = revised sales * Net profit margin * (1- dividend payout ratio)
= ( $ 42,700 *1.04) * 12.88056206% * (1- 0.35)
= $ 3,718
External Financing Needed = Increase in Assets - Increase in Current Liabilities - Earnings Retained
= $ 1,956 - $ 146 - $ 3,718
= - $1,908
Hence the correct answer is - $1,908
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