What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout ratio was increased to 65 percent?
Added by Carl H.
Step 1
50% - Dividend payout ratio: 65% Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 73 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
When creating pro forma statements, the external financing need will increase if you: Multiple Choice increase the corporate tax rate. decrease the dividend payout ratio. increase the plowback ratio. decrease the rate of sales growth. decrease the projected level of sales.
Akash M.
because of its excess funds, fuzzy button is thinking about raising its dividends payout ratio to satisfy shareholders. what percentage of its earnings can fuzzy button pay to shareholders without needing to raise any external capital
Shu N.
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. Income Statement Sales: $250,000 Expenses: $192,000 Earnings before interest and taxes: $58,000 Interest: $7,500 Earnings before taxes: $50,500 Taxes: $15,500 Earnings after taxes: $35,000 Dividends: $7,000 Balance Sheet Assets: Cash: $8,500 Accounts receivable: $63,000 Inventory: $91,000 Current assets: $162,500 Fixed assets: $85,000 Total assets: $247,500 Liabilities and Stockholders' Equity: Accounts payable: $26,400 Accrued wages: $2,350 Accrued taxes: $3,750 Current liabilities: $32,500 Notes payable: $7,500 Long-term debt: $17,500 Common stock: $125,000 Retained earnings: $65,000 Total liabilities and stockholders' equity: $247,500 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.) Note: Do not round intermediate calculations. Input your answer as a positive value.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD