Key factors on which external financing depends, as indicated in additional fund needed equation. Additional fund needed: Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company. However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Question

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Answer 1

Question

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

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QUESTION 1 Examine the information provided below and answer the following question. (10 MARKS) The hockey stick model of start-up financing, illustrated by the diagram below, has received a lot of attention in the entrepreneurial finance literature (Cumming & Johan, 2013; Kaplan & Strömberg, 2014; Gompers & Lerner, 2020). The model is often used to describe the typical funding and growth trajectory of many startups. The model emphasizes three main stages, each of which reflects a different phase of growth, risk, and funding expectations. Entrepreneur, 3 F's Debt(banks & microfinance) Research Business angels/Angel Venture funds/Venture capitalists Merger, Acquisition Grants investors PO Public market Growth (revenue) Break even point Pide 1st round Expansion 2nd round 3rd round Research commercial idea Pre-seed Initial concept Seed Early Expansion Financial stage Late IPO Inception and prototype Figure 1. The hockey stick model of start-up financing (Lasrado & Lugmayr, 2013) REQUIRED:…

Answer 2

Question

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

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Answer 3

Question

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

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Answer 4

Question

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

Answer 6

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

Answer 7

Chapter 16, Problem 1Q

Summary Introduction

To explain: Key factors on which external financing depends, as indicated in additional fund needed equation.

Additional fund needed:

Additional fund needed is also known as external financing needed. It is the state in which a company needed finance to increase its operation. Additional fund needed is a method in which companies raise the funds through external resources to increase its assets, which would increase the sales revenue of a company.

However, according to additional fund needed method, a company does not change its financial ratio. Liabilities and retained earnings spontaneously increase with the increase in sales and assets.

Answer 8

Expert Solution & Answer

Answer to Problem 1Q

Key factors on which external financing depend are as follows:

Payout ratio:

Payout ratio is the fraction of dividend and net income. It is the amount of dividend that has to be paid to the shareholders out of the net income of the year.

Sales growth rate:

Sales growth rate means the growth rate in which the sales of a company grow per year.

Capital intensity ratio:

Capital intensity ratio is the ratio that helps to find the amount of capital a company needed to invest in its assets so that company has enough assets to meet its sales target. It helps to find out the amount of capital a company can invest into its assets.

Profit margin:

Profit margin is the excess of total sales revenue over the total cost. Profit margin is the difference between net sales and cost.

Days sales outstanding:

Days sales outstanding means the number of days a company needed to pay off to its suppliers.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The payout ratio is a key factor of additional fund needed to know whether the company has enough net income to pay off the dividends to its shareholders. It helps to know the company’s profitability and company’s ability to pay off the dividends to its shareholders.
Every company’s main motive is to earn maximum profit. A company cannot survive without earning a profit. The profit margin is a key factor of additional fund needed because the company needs additional funding to increase its operations, which results in profit margin.
Sales growth rate is a key factor of external financing because the company needs additional funding to increase its assets so that company can increase its sales and expand its operations.
Capital intensity ratio is a key factor of additional needed fund so that the company can determine the amount of additional capital a company needed to invest into its assets.
Day’s sales outstanding are a key factor of external funds because it helps a company to determine the number of days available with a company to pay off to its suppliers.

Answer 12

Conclusion

External financing depends on payout ratio, sales growth rate, capital intensity ratio, profit margin, and days sales outstanding.

Answer 13

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Answer to Problem 1Q

Explanation of Solution

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