17 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 liabilities, only current liabilities vary directly with sales. Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends. Income Statement: Cash Accounts receivable. Inventory Fixed assets Assets Current assets Total assets The firm $230,000 168,500 $ 61,500 9,500 $ 52,000 17,500 $ 34,500 $ 13,800 Balance Sheet Liabilities and Stockholders' Equity $6,500 42,000 Accrued wages 55,000 Accrued taxes $ 103,500 90,000 Accounts payable Current liabilities Notes payable Long-term debt Common stock Retained earnings $ 193,500 Total liabilities and stockholders' equity $ 22,800 2,450 4,650 $ 29,900 9,500 27,500 110,000 16,600 $ 193,500 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.)
17 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 liabilities, only current liabilities vary directly with sales. Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends. Income Statement: Cash Accounts receivable. Inventory Fixed assets Assets Current assets Total assets The firm $230,000 168,500 $ 61,500 9,500 $ 52,000 17,500 $ 34,500 $ 13,800 Balance Sheet Liabilities and Stockholders' Equity $6,500 42,000 Accrued wages 55,000 Accrued taxes $ 103,500 90,000 Accounts payable Current liabilities Notes payable Long-term debt Common stock Retained earnings $ 193,500 Total liabilities and stockholders' equity $ 22,800 2,450 4,650 $ 29,900 9,500 27,500 110,000 16,600 $ 193,500 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.)
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
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The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:17
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 liabilities, only current liabilities vary directly with sales.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends.
Income Statement:
Cash
Accounts receivable.
Inventory
Fixed assets
Assets
Current assets
Total assets
The firm
$230,000
168,500
$ 61,500
9,500
$ 52,000
17,500
$ 34,500
$ 13,800
Balance Sheet
Liabilities and Stockholders' Equity
$6,500
42,000 Accrued wages
55,000
Accrued taxes
$ 103,500
90,000
Accounts payable
Current liabilities
Notes payable
Long-term debt
Common stock
Retained earnings
$ 193,500 Total liabilities and stockholders' equity
$ 22,800
2,450
4,650
$ 29,900
9,500
27,500
110,000
16,600
$ 193,500
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.)
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