Conn Man’s Shops, a national clothing chain, had sales of $400 million last year. The business has a steady net profit margin of 9 percent and a dividend payout ratio of 25 percent. The balance sheet for the end of last year is shown. Balance Sheet End of Year (in $ millions) Assets Liabilities and Stockholders' Equity Cash $ 30 Accounts payable $ 71 Accounts receivable 45 Accrued expenses 50 Inventory 87 Other payables 63 Plant and equipment 118 Common stock 60 Retained earnings 36 Total assets $ 280 Total liabilities and stockholders' equity $ 280 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 20 percent is forecast for the company. 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 9 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? multiple choice No Correct Yes b. What would be the need for external financing if the net profit margin went up to 10.50 percent and the dividend payout ratio was increased to 65 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 $400 million last year. The business has a steady net profit margin of 9 percent and a dividend payout ratio of 25 percent. The balance sheet for the end of last year is shown.
| Balance Sheet End of Year (in $ millions) |
|||||
| Assets | Liabilities and Stockholders' Equity | ||||
| Cash | $ | 30 | Accounts payable | $ | 71 |
| 45 | Accrued expenses | 50 | |||
| Inventory | 87 | Other payables | 63 | ||
| Plant and equipment | 118 | Common stock | 60 | ||
| 36 | |||||
| Total assets | $ | 280 | Total liabilities and stockholders' equity | $ | 280 |
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 20 percent is
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 9 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?
multiple choice
-
No Correct
-
Yes
b. What would be the need for external financing if the net profit margin went up to 10.50 percent and the dividend payout ratio was increased to 65 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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