Sohar Video Products’ sales are expected to increase from OMR (10) million in 2020 to OMR (12) million in 2021. Asset turnover generated in the 2020 of (2.5) times. Sohar Company is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2020, current liabilities were OMR (2) million, the net profit was OMR (30) thousand, and the dividend payout ratio was 20%. Suppose the net profit margin (NPM) and dividend payout ratio (D%) will hold the same percentage in 2021. Is Sohar company needs fund from external or internal to finance the new sales in 2021? And why. (Note: - Kindly mention the equations that are related)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Sohar Video Products’ sales are expected to increase from OMR (10) million in 2020 to OMR (12) million in 2021. Asset turnover generated in the 2020 of (2.5) times. Sohar Company is already at full capacity, so its assets must grow at the same rate as projected sales.
At the end of 2020, current liabilities were OMR (2) million, the net profit was OMR (30) thousand, and the dividend payout ratio was 20%. Suppose the net profit margin (NPM) and dividend payout ratio (D%) will hold the same percentage in 2021.
Is Sohar company needs fund from external or internal to finance the new sales in 2021? And why. (Note: - Kindly mention the equations that are related)
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