aggie's Muffins Bakery generated $2 million in sales during 2019, and its yea d total assets were $1.7 million. Also, at year-end 2019, current liabilities w million, consisting of $300,000 of notes payable, $500,000 of accounts yable, and $200,000 of accruals. Looking ahead to 2020, the company timates that its assets must increase at the same rate as sales, its ontaneous liabilities will increase at the same rate as sales, its profit margin Il be 3%, and its payout ratio will be 80%. How large a sales increase can th mpany achieve without having to raise funds externally-that is what is its

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Self-Supporting Growth Rate
Maggie's Muffins Bakery generated $2 million in sales during 2019, and its year-
end total assets were $1.7 million. Also, at year-end 2019, current liabilities were
$1 million, consisting of $300,000 of notes payable, $500,000 of accounts
payable, and $200,000 of accruals. Looking ahead to 2020, the company
estimates that its assets must increase at the same rate as sales, its
spontaneous liabilities will increase at the same rate as sales, its profit margin
will be 3%, and its payout ratio will be 80%. How large a sales increase can the
company achieve without having to raise funds externally—that is, what is its
self-supporting growth rate? Do not round intermediate calculations. Enter your
answer for sales increase in dollars. For example, an answer of $2 million should
be entered as 2,000,000. Round the monetary value to the nearest dollar and
percentage value to one decimal place.
Sales can increase by $
-200,000
I
that is by
0.71
%.
Transcribed Image Text:Self-Supporting Growth Rate Maggie's Muffins Bakery generated $2 million in sales during 2019, and its year- end total assets were $1.7 million. Also, at year-end 2019, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2020, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 3%, and its payout ratio will be 80%. How large a sales increase can the company achieve without having to raise funds externally—that is, what is its self-supporting growth rate? Do not round intermediate calculations. Enter your answer for sales increase in dollars. For example, an answer of $2 million should be entered as 2,000,000. Round the monetary value to the nearest dollar and percentage value to one decimal place. Sales can increase by $ -200,000 I that is by 0.71 %.
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