The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 35 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 $ 220,000 Expenses 171,200 Earnings before interest and taxes $ 48,800 Interest 8,300 Earnings before taxes $ 40,500 Taxes 16,300 Earnings after taxes $ 24,200 Dividends $ 7,260 Balance Sheet Assets Liabilities and Stockholders' Equity Cash $ 8,000 Accounts payable $ 23,400 Accounts receivable 33,000 Accrued wages 1,850 Inventory 69,000 Accrued taxes 3,350 Current assets $ 110,000 Current liabilities $ 28,600 Fixed assets 93,000 Notes payable 8,300 Long-term debt 21,500 Common stock 117,000 Retained earnings 27,600 Total assets $ 203,000 Total liabilities and stockholders' equity $ 203,000 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.) (Do not round intermediate calculations.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 13P: Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth...

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The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 35 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	$	220,000
Expenses		171,200
Earnings before interest and taxes	$	48,800
Interest		8,300
Earnings before taxes	$	40,500
Taxes		16,300
Earnings after taxes	$	24,200
Dividends	$	7,260

Balance Sheet
Assets	Liabilities and Stockholders' Equity
Cash	$	8,000	Accounts payable	$	23,400
Accounts receivable		33,000	Accrued wages		1,850
Inventory		69,000	Accrued taxes		3,350
Current assets	$	110,000	Current liabilities	$	28,600
Fixed assets		93,000	Notes payable		8,300
			Long-term debt		21,500
			Common stock		117,000
			Retained earnings		27,600
Total assets	$	203,000	Total liabilities and stockholders' equity	$	203,000

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.) (Do not round intermediate calculations.)

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