Conn Man's Shops, a national clothing chain, had sales of $370 million last year. The business has a steady net profit margin of 7 percent and a dividend payout ratio of 30 percent. The balance sheet for the end of last year is shown. Assets Cash Accounts receivable Inventory Plant and equipment Total assets O No Balance Sheet End of Year (in $ millions) $27 42 84 180 Yes Liabilities and Stockholders' Equity Accounts payable Accrued expenses Other payables Common stock Retained earnings $333 Total liabilities and stockholders' equity The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and wool slacks. A sales increase of 10 percent is forecast for the company. $71 37 40 54 131 $333 All balance sheet items are expected to maintain the same percent-of-sales relationships as last year,* except for common stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7 percent.) *This includes fixed assets, since the firm is at full capacity. a. Will external financing be required for the company during the coming year? b. What would be the need for external financing if the net profit margin went up to 7.50 percent and the dividend payout ratio was increased to 60 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567).)
Conn Man's Shops, a national clothing chain, had sales of $370 million last year. The business has a steady net profit margin of 7 percent and a dividend payout ratio of 30 percent. The balance sheet for the end of last year is shown. Assets Cash Accounts receivable Inventory Plant and equipment Total assets O No Balance Sheet End of Year (in $ millions) $27 42 84 180 Yes Liabilities and Stockholders' Equity Accounts payable Accrued expenses Other payables Common stock Retained earnings $333 Total liabilities and stockholders' equity The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and wool slacks. A sales increase of 10 percent is forecast for the company. $71 37 40 54 131 $333 All balance sheet items are expected to maintain the same percent-of-sales relationships as last year,* except for common stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7 percent.) *This includes fixed assets, since the firm is at full capacity. a. Will external financing be required for the company during the coming year? b. What would be the need for external financing if the net profit margin went up to 7.50 percent and the dividend payout ratio was increased to 60 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Conn Man's Shops, a national clothing chain, had sales of $370 million last year. The business has a steady net profit margin of 7
percent and a dividend payout ratio of 30 percent. The balance sheet for the end of last year is shown.
Assets
Cash
Accounts receivable
Inventory
Plant and equipment
Total assets
$27
O No
Balance Sheet
End of Year
(in $ millions)
Yes
Liabilities and Stockholders' Equity
Accounts payable
42 Accrued expenses
Other payables
84
180
Common stock
Retained earnings
$333 Total liabilities and stockholders' equity
The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and
wool slacks. A sales increase of 10 percent is forecast for the company.
$71
37
40
54
131
$333
All balance sheet items are expected to maintain the same percent-of-sales relationships as last year,* except for common stock and
retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as
dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7 percent.)
*This includes fixed assets, since the firm is at full capacity.
a. Will external financing be required for the company during the coming year?
b. What would be the need for external financing if the net profit margin went up to 7.50 percent and the dividend payout ratio was
increased to 60 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter
your answer in dollars, not millions, (e.g., $1,234,567).)
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