Dopey, Inc., a national clothing chain had sales of P 300 million last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The statement of financial position for the end of last year is shown next. Statement of Financial Position End of Year (P millions) Assets Liabilities and Stockholders' Equity Cash................................P 20 Accounts payable.........................P 70 Accounts receivable......... 25 Accrued expenses......................... 20 Inventory.......................... 75 Other payables............................. 30 Plant and Equipment......... 120 Common stock.............................. 40 Retained Earnings.......................... 80 Total Liabilities and Total assets.......................P 240 stockholders'' equity..................P 240 The company's marketing staff has told the president that in the coming years there will be large increase in the demand for coats and slacks. A sales increase of 15 percent is forecast for the company. All statement of financial position items is expected to maintain the same percent-of-sales relationship 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 pf the company. (Remember the net profit margin is 8 percent). QUESTIONS a. Will external financing be required for the company during the coming year? b. What would be the need for external financing of the net profit margin went up to 9.5 percent and dividend payout ratio were increase to 50% percent? Explain.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Dopey, Inc., a national clothing chain had sales of P 300 million last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The statement of financial position for the end of last year is shown next. Statement of Financial Position End of Year (P millions) Assets Liabilities and Stockholders' Equity Cash................................P 20 Accounts payable.........................P 70 Accounts receivable......... 25 Accrued expenses......................... 20 Inventory.......................... 75 Other payables............................. 30 Plant and Equipment......... 120 Common stock.............................. 40 Retained Earnings.......................... 80 Total Liabilities and Total assets.......................P 240 stockholders'' equity..................P 240 The company's marketing staff has told the president that in the coming years there will be large increase in the demand for coats and slacks. A sales increase of 15 percent is forecast for the company. All statement of financial position items is expected to maintain the same percent-of-sales relationship 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 pf the company. (Remember the net profit margin is 8 percent). QUESTIONS a. Will external financing be required for the company during the coming year? b. What would be the need for external financing of the net profit margin went up to 9.5 percent and dividend payout ratio were increase to 50% percent? Explain.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 5 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions