The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 30 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. Income Statement Sales $ 240,000 Expenses 181,200 Earnings before interest and taxes $ 58,800 Interest 7,400 Earnings before taxes $ 51,400 Taxes 15,400 Earnings after taxes $ 36,000 Dividends $ 12,600 Balance Sheet Assets Liabilities and Stockholders' Equity Cash $ 6,000 Accounts payable $ 23,300 Accounts receivable 57,000 Accrued wages 1,800 Inventory 81,000 Accrued taxes 3,700 Current assets $ 144,000 Current liabilities $ 28,800 Fixed assets 84,000 Notes payable 7,400 Long-term debt 17,000 Common stock 124,000 Retained earnings 50,800 Total assets $ 228,000 Total liabilities and stockholders' equity $ 228,000 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.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 13P: Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth...

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The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 30 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.

Income Statement
Sales	$	240,000
Expenses		181,200
Earnings before interest and taxes	$	58,800
Interest		7,400
Earnings before taxes	$	51,400
Taxes		15,400
Earnings after taxes	$	36,000
Dividends	$	12,600

Balance Sheet
Assets	Liabilities and Stockholders' Equity
Cash	$	6,000	Accounts payable	$	23,300
Accounts receivable		57,000	Accrued wages		1,800
Inventory		81,000	Accrued taxes		3,700
Current assets	$	144,000	Current liabilities	$	28,800
Fixed assets		84,000	Notes payable		7,400
			Long-term debt		17,000
			Common stock		124,000
			Retained earnings		50,800
Total assets	$	228,000	Total liabilities and stockholders' equity	$	228,000

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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