Problem 4-28 (Algo) Percent-of-sales method [LO4-3] The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 30 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 Expenses Earnings before interest and taxes Interest Earnings before taxes. Taxes Earnings after taxes Dividends Cash Accounts receivable Inventory Current assets Fixed assets Total assets Assets The firm $ 250,000 184,800 $ 65,200 8,600 $ 56,600 16,600 $ 40,000 $ 16,000 Balance Sheet (in $ millions) Liabilities and Stockholders' Equity $ 4,000 Accounts payable Accrued wages 53,000 68,000 Accrued taxes $ 125,000 96,000 Current liabilities Notes payable Long-term debt Common stock Retained earnings $ 221,000 Total liabilities and stockholders' equity $ 23,500 2,000 4,500 $30,000 8,600 23,000 120,000 39,400 $ 221,000 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 positive a value.
Problem 4-28 (Algo) Percent-of-sales method [LO4-3] The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 30 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 Expenses Earnings before interest and taxes Interest Earnings before taxes. Taxes Earnings after taxes Dividends Cash Accounts receivable Inventory Current assets Fixed assets Total assets Assets The firm $ 250,000 184,800 $ 65,200 8,600 $ 56,600 16,600 $ 40,000 $ 16,000 Balance Sheet (in $ millions) Liabilities and Stockholders' Equity $ 4,000 Accounts payable Accrued wages 53,000 68,000 Accrued taxes $ 125,000 96,000 Current liabilities Notes payable Long-term debt Common stock Retained earnings $ 221,000 Total liabilities and stockholders' equity $ 23,500 2,000 4,500 $30,000 8,600 23,000 120,000 39,400 $ 221,000 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 positive a value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 4-28 (Algo) Percent-of-sales method [LO4-3]
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 30 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.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends
Income Statement
Fixed assets
Cash
Accounts receivable
Inventory
Current assets
Total assets
Assets
The firm
$ 250,000
184,800
$ 65,200
8,600
$ 56,600
16,600
$ 40,000
$ 16,000
Balance Sheet (in $ millions)
$ 125,000
96,000
Liabilities and Stockholders' Equity
$4,000 Accounts payable
53,000 Accrued wages
68,000 Accrued taxes
Current liabilities
Notes payable
Long-term debt
Common stock
Retained earnings
$ 221,000 Total liabilities and stockholders' equity
$ 23,500
2,000
4,500
$ 30,000
8,600
23,000
120,000
39,400
$ 221,000
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 positive a value.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F37d1a40a-61d4-4f77-9688-d73090940e72%2Fb2630b8e-13f5-463e-bc7b-3b5c7501dbe7%2F6ueb38_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 4-28 (Algo) Percent-of-sales method [LO4-3]
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 30 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.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends
Income Statement
Fixed assets
Cash
Accounts receivable
Inventory
Current assets
Total assets
Assets
The firm
$ 250,000
184,800
$ 65,200
8,600
$ 56,600
16,600
$ 40,000
$ 16,000
Balance Sheet (in $ millions)
$ 125,000
96,000
Liabilities and Stockholders' Equity
$4,000 Accounts payable
53,000 Accrued wages
68,000 Accrued taxes
Current liabilities
Notes payable
Long-term debt
Common stock
Retained earnings
$ 221,000 Total liabilities and stockholders' equity
$ 23,500
2,000
4,500
$ 30,000
8,600
23,000
120,000
39,400
$ 221,000
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 positive a value.
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