Problem 4-29 (Algo) Percent-of-sales method [LO4-3] Conn Man's Shops, a national clothing chain, had sales of $420 million last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The balance sheet for the end of last year is shown. Assets No O Yes Balance Sheet End of Year (in 5 millions) Cash Accounts receivable Inventory Plant and equipment Total assets. 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. $42 47 93 $ 175 Required new funds Liabilities and Stockholders' Equity Accounts payable Accrued expenses Other payables Connon stock Retained earnings. $ 357 Total liabilities and stockholders' equity $54 40 53 84 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 8 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? 126 $ 357 b. What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout ratio was increased to 65 percent? Note: 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). Input your answer as positive a value.
Problem 4-29 (Algo) Percent-of-sales method [LO4-3] Conn Man's Shops, a national clothing chain, had sales of $420 million last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The balance sheet for the end of last year is shown. Assets No O Yes Balance Sheet End of Year (in 5 millions) Cash Accounts receivable Inventory Plant and equipment Total assets. 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. $42 47 93 $ 175 Required new funds Liabilities and Stockholders' Equity Accounts payable Accrued expenses Other payables Connon stock Retained earnings. $ 357 Total liabilities and stockholders' equity $54 40 53 84 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 8 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? 126 $ 357 b. What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout ratio was increased to 65 percent? Note: 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). Input your answer as positive a value.
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
Section: Chapter Questions
Problem 1PS
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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